Student Loans

Financial Aid that must be paid back

There are very few students who can afford to finance their education on their own. The National Postsecondary Student Aid Study in 2003-2004 stated 65.7 percent of four-year undergraduate student's graduate with some debt with the average student loan debt among graduation seniors being $19,237 excluding the PLUS loans.

What if you Can't Get a Grant or Scholarship

If it is impossible for you to get a grant or scholarship from a college, you could opt for a college loan. There are three categories of student loans. Student loans such as the Stafford and Perkins loans and Parent loans, like the PLUS loans. There are also private student loans or the consolidation loan which allows the borrower to lump all of their loans into one loan to simplify payment.

The Pros of Getting a Student Loan

There are several 'pros' to getting a student loan. Many will defer payments until the student has graduated and federal law sets the maximum interest rates and fees that lenders may charge. Many lenders offer attractive fees and interest rates to attract borrowers.

Federal Loans

The Federal Stafford Loans are fixed-rate low interest loans available to undergraduate students. To be eligible, you need to be a U.S. citizen or permanent resident or eligible non-citizen, you must be enrolled or plan to enroll at least half-time, you must be accepted for enrollment or attend a school that participates in the Federal Family Education Loan Program and you must not be in default on any education loan or owe a refund on an education grant and you must have a financial need determined by the college.

The Stafford loan offers flexible repayment options, no payments are required while you are in school, you are able to manage your account online, no credit check is required, there is a six-month grace period following your graduation and there is no prepayment penalty.

There are two types of Stafford Loans; subsidized, which are need-based with the government paying the interest on these loans while in school. The other type of Stafford Loans is the unsubsidized, which are not need-based and you will be responsible for all of the interest that accrues on the loan, including while you are in school.

The Federal Perkins Loans

The Federal Perkins loans are low interest, about 5% interest loan for undergraduate and graduate students with 'exceptional' financial need. The qualifications for this loan is you will need to be enrolled in an eligible school at least half-time in a degree program, a U.S. citizen or eligible non-citizen status, have a satisfactory academic progress, have no unresolved defaults or overpayments owed on title IV education loans and grants and meet all selective service requirements.

The school will pay you directly or apply your loan to your school charges. You should be receiving the loan in two payments per year. This loan is very much like the Stafford loan except there is a longer 'grace' period before you need to start paying the loan and there are no fees.

The PLUS Loan

The PLUS loans are the loans that parent take out to finance the college education. Parents can apply for PLUS loans if the student is a dependent. They will be required to pass a credit check to qualify for this loan. The interest rate is generally not reduced and as of July 2006 remains at 7.6%. The yearly limit parents can borrow is equal to the cost of attending the school less any financial aid the student is receiving.