Choosing Education Loans
Education is an important investment for everyone. However, with the rising cost of tuition many wonder how they can afford college. In addition to tuition which can be upwards of five thousand a year there is the expense of books and living especially if you are going to a college out of town. This is why many individuals are turning to education loans. The government and private lenders offer a wide range of college education loans. Consider the following tips to choose the best and cheapest education loans for your needs.Government Loans
The federal government has two programs that offer education loans. These are direct education loans that come from the government and feature favorable interest rates. Within these two programs there are three types of federal student loans that you should consider.The first is the Stafford Loan which is given to undergraduate and graduate students who are going to college at least half time at an accredited school. You typically have ten to twenty-five years to pay back these loans and they feature a fixed interest rate. For those who have financial difficulties you can apply for a subsidized Stafford Loan in which the government pays your interest while you are in school and for six months after you graduate.
Then there are PLUS loans, which is when parents take financial responsibility for a child's education. These loans have a higher interest rate than the Stafford Loan but parents can be approved for the full cost of college minus any other financial aid the student in receiving. This means the loan can cover not only tuition, but living expenses and books as well. These loans don't have a subsidy so the interest must be paid while the student attends school.
Finally there is the Perkins Loan which is separate from direct education loans and is specifically designed for the student with special financial needs. The funds for these educational loans come directly from the school you are attending. These educational loans need to be repaid within ten years or less depending on the terms of your specific loan. The Perkins Loan has an excellent interest rate with no fees and you don't have to start repaying the loan until nine months after you have graduated.
Private Education Loans
If you can't get approved for federal education loans then there are still options available. Many private lenders have loans that can help pay for your education. While many of these education loans have higher rates than the government, they will be better than other forms of consumer borrowing.There are some advantages to private education loans when compared to the federal loans. First, these education loans are easier to qualify. Most federal loans have limit on the amount you can borrow, but there is no limit for private education loans. Sometimes you can get education loans through private lenders that cover the entire cost of your education minus any other grants or financial aid you are receiving. This is why many choose private education loans to supplement the money they get from the government.
Parents who want to assist with their children's education may find that private loans also offer more flexibility when you are backing it up with the equity in your home. A home equity line of credit loan will have very competitive interest rates, sometimes even lower than the PLUS loan from the government. These education loans also allow you to draw out how much you need when you need it rather than receiving it all in one lump sum or in yearly installments. These education loans may also be tax deductible.
Lenders may also offer bed credit education loans for students who less than perfect credit history. For some students this may be the best option when you have been turned down for all other types of education loans.
It is best to visit the financial aid office in your school. They will be able to discuss the federal aid options available to you as well as provide you with the paperwork necessary to apply for these federal education loans. Your financial aid office will also be able to give you a list of lenders preferred by your school. These lenders may be able to give you better terms and conditions if you are referred by your school.
Your school's financial aid officer is also equipped to tell you about the features of each loan offered through private lenders. So if you have any questions you can ask them or discuss your best loan options. However, don't feel you are limited to the banks that your school refers you to. It is always best to get quotes from at least five different lenders for education loans. Carefully consider each of the terms and conditions. While interest rate may be low you also want good terms and conditions before selecting a specific educational loan.
