Loans students
Student loans are offered to those students who need financial help for professional education. Student loans have low interest rates than other loans and these loans are offered by government, semi-government and private agencies.
The Student loans which have no guarantee by government agencies are offered by Banks and Financial agencies to the students. It has been suggested to students that they combine various elements of different loans into one because government offers higher limits than direct Student loans. They offer a grace period with no repayments until graduation. The grace period can range up to a maximum of 12 months after graduation but most private lenders have grace period of about 6 months.
Student loan rates are lower than that in other types of loans. Private Student loans are based on credit history of the student. Students who belong to financially rich families are offered with a handsome amount of credit by the loan providing agencies and receive lower rates of interest as there is a low risk of repayment for the loan agencies.
Eligibility:
Student loans are generally issued based on the credit history of the student. This is in contrast with federal loans programs which deal with need based criteria defined by EFC and FAFSA for the students which are a great advantage for them as their families have good credit history to qualify for federal aid but have insufficient assets for schooling.
In order to receive student loan or federal or state aid the student must meet the following criteria:
i) Must be a U.S. citizen or eligible non-citizen.
ii) Student must be accepted by higher educational institution.
The amount of financial aid a student is eligible for, is based on difference between cost for the schooling and family contribution. Eligibility for financial aid differs from school to school, college to college depending upon the differing school/college budgets. At a low cost institution student will need less financial assistance than that of a higher institution. The amount that the family is accepted to pay is called the family contribution. The family contribution is determined by the analysis of family resources.
Factors that are taken into consideration are:
i) Income,
ii) Savings and assets,
iii) Size of the household, and
iv) Number of children/dependants in the house.
Some students may be self-employed or independent and they are not financially dependent on family and if they meet other criteria. In this case only the students resources are taken into consideration.
The application for the loan is very much different from that of the college form. To begin this process application a student must have following:
i) Free application for Federal student aid (FAFSA).
ii) Profile form.
iii) Institutional form.
When to apply for the loan:
The free application for FAFSA cannot be submitted prior to 1 January of the year student plans to enroll in college or university. Each school or college has its own deadline as when students want all financial aid forms to be received in their financial aid office. Failure in meeting all deadlines may deny the student for financial aid.
Hint: Once all the deadlines are meant for the college which the student is applying, student should use that as his own deadline for having all the paper work done.
What happens after applying
The free application for Federal aid the student completes is sent to processing agency. Once the processing is complete the information which is obtained from the application is sent to the school/college which the student has chosen. Every student will receive Student Aid Report (SAR) which will be sent by the processing agency to the student within four to six weeks after the agency receives students FAFSA.
Types:
Private loans are generally of two types:
i) School channel, and
ii) Direct-to-consumer.
Student channel loans offer applicants lower interest rates but take longer time to process. These loans are certifies by the schools and school signs off borrowing amount.
Direct-to-consumer loans are not certified by the schools and schools do not interact with Direct-to-consumer loan at all. In this type of loan the student simply submits enrollment verification of one sort to the lender and the loan proceeds subsequently. Direct-to-consumer loan has higher interest rates than that of School channel loan; they allow students to access funds very quickly.
Direct-to-consumer loan is spreading very fast as a segment in educational loans.
How much aid will you receive
The Federal regulation says that you can not receive more aid than your requirement. In some cases students may receive full amount of the finance they require, however in many cases students receive less amount than there eligibility.
The students who receive only a part of there eligibility amount have an unmet need than he may be eligible to borrow under the Federal Family Education Loan Program (FFELP), which includes the Subsidized Federal Stafford Loan Program and the Unsubsidized Federal Stafford Loan Program.
Repayment:
1) When do you start Repaying your loan
2) Cancellation of loan.
3) How to be a smart Barrower
When do you start repaying your loan
After you graduate, leave school, or drop below half-time enrollment at a participating school, generally you have a grace period before you have to begin repayment.
For Federal Perkins Loans, the grace period is nine months.
For FFEL Stafford Loans and Direct Stafford Loans, the grace period is six months.
If your parents borrow a FFEL PLUS Loan or a Direct PLUS Loan for you, there is no grace period. The first payment on these loans is generally due within 60 days after the final loan disbursement for the period of enrollment for which your parents borrowed.
In the grace period of subsidized Stafford loan, you dont need to pay any principal or interest because the interest is paid by the federal government. In unsubsidized loan you need not to pay any principal but interest will be charged. But you also have a choice there, you can pay the interest immediately or it can be added to your principal amount which can be paid later.
If you should return to school at least half time before the grace period ends, you again may postpone loan repayment while youre in school, and youll be entitled to a full grace period when you terminate enrollment or drop below half-time enrollment status. You must understand, however, that once the grace period ends, you are in repayment status and must request a deferment if you want to postpone repayment.
Cancellation of loans
Your federal student loan can be cancelled or discharged only in some special cases. Discharge of loan relives you from all the obligations of repaying the loan. You will not be discharged unless you have a valid reason. You will not be discharged of your loan if you dont complete your studies at school or you dont have a job after schooling. In case of barrowers death or full disability the amount forgiven is 100%. And this is applicable only in direct loans or FFEL. In case of Perkins loans if the barrower is permanently and fully disabled the amount forgiven is up to 100%.
How to be a smart barrower
You can be a smart barrower by remembering the fallowing points:
Loans are barrowed money and have to be repaid.
You have to repay the loan even if you dont like the education you are getting.
You must make your monthly payments of the loan even if you dont receive any reminders
You can pay off any amount of your loan at any time even if the money you are paying is not due.
You must make payments on your loan even if you have applied for deferment. You have to make payments till a notice is send to you of accepting your deferment.
The consequences of defaulting on a federal student loan are severe and long lasting.
There are repayment options available to assist you if youre having trouble making payments.
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