Student Loans
When deciding on the types of student loans you need for college, it's important to understand the different options available and how they're handled in terms of payment, maximum amount, and duration. Two basic types of student loans are available.
Federal Student Loan Programs
Federal student loans, which include the Stafford and Perkins options for
undergraduates, are available to students enrolled at least half time in
accredited institutions. they offer low, fixed interest rates as well as
flexible repayment options. The interest is paid by the government while
the student is enrolled in school, and there's a six-month grace period
(during which interest accrues but no payments are required) after
graduation. The amount of money a student can borrow in a given academic
year under these programs is based on whether the student is a dependent or
independent in terms of parental financial support, as well as aggregate
maximum amounts for a four-year degree. These loans are serviced by the
Sallie Mae organization, which manages both the application and repayment
process. No credit check is required in order to qualify.
Federal programs also often allow borrowers to start repayment at a lower monthly amount, with this payment increasing gradually over time as their income rises. Standard repayment terms are for ten years, but extended payment plans are often available.
Private Student Loans
Private loans, such as the Signature and Tuition Answer loans, are
designed to fill in the gaps once a student has borrowed maximum amounts
against the standard Federal student loan programs. These loans typically
involve a credit check, though approval rates are typically high. Students
enrolled at least half time in a four- year program can typically borrow up
to $100,000 using this loan system, depending on the institution's reported
tuition and fees for such a program. Individuals enrolled in community
college programs can borrow up to $50,000, again depending on the actual
cost of the program in which they're participating.
Interest rates on this type of loan are variable, and are typically lower when the student's own credit rating qualifies such treatment, or when individuals with good credit ratings (eg. parents or other relatives) are willing to cosign the loan. These programs also provide for lowered interest rates for borrowers whose payment records include 24 consecutive months of on-time payments. The usual repayment term is ten years, but this can be extended for borrowers with high debt levels.
