Loans
Few
students attend college today without some form of financial
aid. Unlike scholarships, loans are a
form of financial aid that must be repaid, usually with
interest.
The options include Perkins, Stafford and PLUS loans,
each of which have different terms, conditions and borrowing
limits.
-
Perkins
rates are usually the lowest at a fixed 5 percent, while
the other two, which are tied to Treasury bills, are
mostly a bit higher.
Students
may apply for subsidized or unsubsidized Stafford
Loans.
-
A
subsidized Stafford loan is based on need. The federal
government pays the interest on the loan while the
student is in school.
-
On
unsubsidized loans, the borrower is responsible
for the interest from the date the loan is disbursed.
- Federal
loans are available to parents as well. Parents may borrow
up to the full cost of a student's education minus any
financial aid with a Parent Loan for Undergraduate
Students (PLUS). These loans are government-sponsored
and have a variable interest rate that is capped at 9
percent. Families
must pass a credit check to qualify for a PLUS loan. Monthly
payments begin within 60 days of the loan disbursement.
- Parents
also may take out private loans like home equity
loans to supplement any government loans.
-
Loan
Consolidation
essentially means that you can combine all your existing
loans into one new loan. Most people find that repaying
just one loan as opposed to three or four different
loans helps them to manage their finances better and
to budget for other things more successfully.
Provided
that the new loan offers a lower interest rate to the
loans you currently have, you should save money. In other
words, you pay back less each month giving you more money
for other expenditures.
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