Education loans for students

Applying for College Student Loans ~

college loans explained

What You Need to Know About Student Loans for College

Most students rely on a variety of funding sources to pay for college. Personal savings and family contributions are one of the first places students turn, but often these resources don’t cover higher- education costs.

Scholarships and grants are windfalls for college funding, because they do not require repayment. Performance and financial need are considered, and then eligible students are endowed with gifts that pay for tuition, books and housing. Do not leave free money on the table – apply for every grant and scholarship for which you qualify.

Loans are the most common funding sources for college: According to the National Postsecondary Student Aid Study (NPSAS), 65% of four-year undergraduate students take out student loans to help them pay for college. But unlike some other resources, loans must be paid back. Loans, and associated interestcosts, typically keep graduates in debt for 10 years or more.

Types of Student Loans

Student loans are funded by a variety of sources including The United States Federal Government and private lenders like banks and credit unions. Federal loans are the most accessible to students, and offer the best repayment terms.

Private loans, also referred to as personal loans and alternative loans can be difficult for students to secure without cosigners. Interest rates are higher than federal student loans, but still fall below most other types of private financing (home, car, etc.)

Federal Student Loans

The Federal Family Education Loan program (FFEL) is a now-defunct lending program designed to provide American college students and their families with federally backed student loans. These loans are now made through the U.S. Department of Education’s Direct Loan Program.

These distinct types of loans are available to students and parents seeking Federal Financial Aid:

  • Subsidized Stafford Loans are available to students who demonstrate financial need. Payments are not required while you are enrolled in school, or during grace periods and deferment periods. Interest rates vary, but are currently 3.4%. Loan limits move on a sliding scale, based on what year you are in college; ranging from $5, 500 annually, for first year students to $7, 500, for third year students and beyond.
  • Unsubsidized Stafford Loans do not require students to show a particular level of financial need. Interest accrues on these loans from the moment the funds are issued, and students are given the choice to pay as they go, or add accumulated interest to the total amount owed following school. Loan limits match those of Subsidized Stafford Loans, but interest rates are higher; currently fixed at 6.8%.

Perkins loans are federally funded loans administered directly by your institution of higher education (IHE). The loans are extended to students who have the greatest financial need. In general, families with annual incomes below $25, 000 are eligible for Perkins Loans.

These three factors determine the size of your Perkins Loan:

  1. When you apply
  2. Your level of financial need
  3. Funding level at your school

The maximum annual loan for undergraduate students is $5500, with a lifetime loan maximum of $27, 000. Graduate students can borrow up to $8000 each year, with a $60, 000 lifetime cap.

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