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Education Loan

Education Loan
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Education costs have risen over the years and it has become difficult for students and their parents to pay for tuition and related expenses from their income and savings. Students apply for free funding awarded in form of grants and scholarships and work-study. These may at times not be enough to cover the full cost of education and the expenses involved in furthering their education. Unless a student is staying at home food and accommodation may become a challenge.

There are various education loans offered by the U.S. Department of Education and also private banks and other lenders. 
Stafford Education Loan is the most affordable student loan which is guaranteed by the government. It is given to students in colleges and universities to pay for tuition and fees and only education related expenses. These include buying books, supplies, a computer and paying for transport, room and board.

Stafford Education Loan may be either subsidized or unsubsidized and each has different annual loan limits which the student can borrow. Subsidized Stafford loans are given to students who demonstrate financial need and they offer the lowest interest rates of 3.4% which is fixed. Unsubsidized loans offer 6.8% fixed interest rate but they are not need-based.

Federal Perkins Loan is a need-based Education Loan which is offered to a college or university student by the U.S. Department of Education. The repayment period is 10 years. The grace period is 9 months after graduation or after the student enrolls below half-time or after the student withdraws from college or university.
   
A parent can borrow a PLUS Loan which has higher limits. This is a student loan borrowed by the parent and must be repaid by the parent not the student. PLUS Loans for parents are different because they start accruing interest after the first loan is fully disbursed. There are deferment and forbearance options. The student must fill the FAFSA form when the parent is applying for a PLUS Loan. The credit history of the parent is considered.

Parents can use Parent Loan Repayment Calculator and Parent Debt Calculator to know how much they should borrow. When a parent does not want to pay a student loan he/she can ask the student to apply for additional Stafford loan or apply for a private student loan with the parent as the co-signer. To be a co-signer means that the parent has agreed to pay the loan if the student does not pay.

A Private Education Loan is credit-rated. A parent can apply for a private loan from banks and other financial institutions. The credit rating of the parent is checked. The student can also apply for a private loan and if dependent will need to use the parent's credit history, as his/her co-signer. The interest rate can be fixed or variable and it is determined by the lender. Private loans are used to pay for the full/part cost of education. Private student loans also meet the expenses not covered by other sources.

Last modified onTuesday, 02 April 2013 16:04
More in this category: « PLUS Loan Parent Loans »

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