Choosing the right college loan(s) will help students finance their education and avoid a bad experience when repayment becomes due. Failure to understand the rules and the options, on the other hand, can lead to unpleasant surprises and serious financial difficulties.
There are two main types of student loans; subsidized and unsubsidized. The important difference between the two is who pays the interest while a student is enrolled in college.
Subsidized student loans are limited to students who demonstrate financial need: students whose incomes are not sufficient to meet college costs. There is a fixed limit on the subsidized loan money students may borrow, but the government pays the interest on such loans while students are enrolled in college and during the first six months thereafter.
Unsubsidized loans are available to all students, regardless of financial need, and are available in far larger amounts. But, students, not the federal government, assume responsibility for the interest payments.
In most cases, students who qualify for unsubsidized loans need the maximum they are allowed to borrow. If they require funds beyond the subsidized loan maximum, they may turn to unsubsidized loans for additional assistance.
Students can apply for the Perkins Loan or the Stafford Loan. Payment on each begins after a student has graduated or has been away from college for six months. This six month "grace period" may be extended at the discretion of the individual lenders.
Parents may also take out PLUS loans for their sons or daughter. PLUS loans offer fairly low interest rates, but require repayment to begin within 30 days.
Student loans must be repaid. Even bankruptcy does cancel repayment obligation. Lenders will almost always work with folks having financial problems if they are making a genuine effort to repay their loans. However, those who attempt to avoid repayment face wage garnishment, the withholding of income tax refunds, and other serious penalties.
Loans are a great way for students to help finance their educational costs. In fact, for most people, they are the best investment they will ever make. But it is important to borrow no more than needed and to repay your loans on a timely basis.
There are two main types of student loans; subsidized and unsubsidized. The important difference between the two is who pays the interest while a student is enrolled in college.
Subsidized student loans are limited to students who demonstrate financial need: students whose incomes are not sufficient to meet college costs. There is a fixed limit on the subsidized loan money students may borrow, but the government pays the interest on such loans while students are enrolled in college and during the first six months thereafter.
Unsubsidized loans are available to all students, regardless of financial need, and are available in far larger amounts. But, students, not the federal government, assume responsibility for the interest payments.
In most cases, students who qualify for unsubsidized loans need the maximum they are allowed to borrow. If they require funds beyond the subsidized loan maximum, they may turn to unsubsidized loans for additional assistance.
Students can apply for the Perkins Loan or the Stafford Loan. Payment on each begins after a student has graduated or has been away from college for six months. This six month "grace period" may be extended at the discretion of the individual lenders.
Parents may also take out PLUS loans for their sons or daughter. PLUS loans offer fairly low interest rates, but require repayment to begin within 30 days.
Student loans must be repaid. Even bankruptcy does cancel repayment obligation. Lenders will almost always work with folks having financial problems if they are making a genuine effort to repay their loans. However, those who attempt to avoid repayment face wage garnishment, the withholding of income tax refunds, and other serious penalties.
Loans are a great way for students to help finance their educational costs. In fact, for most people, they are the best investment they will ever make. But it is important to borrow no more than needed and to repay your loans on a timely basis.
About the Author:
Janet Madden is the Director of Guidance at a large, urban high school. In addition to working with high school students, she advises adults in her school's evening programs on online colleges and accredited online degree programs.
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