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Federal Student Loan

Investigating Various Options for College Student Loans and Saving Costs.

Take a glance at the Federal student loan market and you will discover that the options available are vast; invariably this could make the task of choosing the most apposite student loan an almost Herculean task.

When in need of expert guidance and information on all the possible options this transcript could become very useful. Let us take a look at some interesting facts before we proceed any further:

* More than 50 percent of monetary aid for students occurs in the form of loans.

* Some student loans are need based which are granted to families who demonstrate a particular financial need.

* The remaining types of student loan are non need based and are intended to support families in covering the total outlay of education.

* Need based Federal student loan boast of healthier terms and so these ought to be considered first.

OK now let us look at the four chief categories of Federal loans:

1. Perkins loan: a need based loan that is normally arranged by the financial aid office, depending on the level of need of the student. The interest rate relevant to such a loan is low and the student does not have to make any repayments during the time that the student is still in school. The rate of interest on a Perkins loan is currently approximately five percent (5%).

2. Subsidized Stafford loan: again, this is needs based and is also referred to as a direct loan. The rate of interest on such a loan is currently in the range of four to six percent (4 * 6%), and per the provisions of these loans, the twelve-monthly interest on the sum is compensated for by the Federal government until such time as the student has completed his education and during the grace period which follows graduation.

3. Unsubsidized Stafford loan: this loan is not needs based and essentially is meant to assist a family with the prohibitive costs of education, these are not subsidized and the student is accountable for payments towards the interest on the loan whilst they are still attending school. The student has the alternative of capitalizing the interest in order to evade payment whilst he is still in school. The shortcoming is that the loan amount rises due to the interest amount being added to the loan amount which then denotes more money will have to be repaid on the loan and the monthly payments after graduation will be somewhat elevated.

4. PLUS loans: are not needs based and are student loans backed by the Federal government destined for graduate students. These loans can be made to cope with the total cost of education subtracted from any other financial aid received by the student. The foremost advantage of this loan program is that the borrowing power is greater when compared to other programs. It is, however, advisable to leave this option as a last way out.

Other student loan options:

Federal loans options have been discussed and now we will ponder on a number of other loan options.

* Private student loans: there are various lenders and financial institutions that provide private student loans. These are not need based and are not supported by a Federal guarantee. Accordingly they would not be subsidized and usually come carry a higher rate of interest. The internet has a plethora of information available with respect to such loans and the lenders providing same.

* College sponsored loans: some colleges have a dedicated financial aid office which offers a range of education funding programs; these are specifically for their own students. Information on these can be obtained from the individual colleges. Interestingly the rate of interest on these loans is frequently lower than the interest rate on Federal student loans.

Regarding students education it is not always the student who is taking the loan, so there are options existing for parents who are taking loans on behalf of their children. The loan options for the parents are

* Federal PLUS loan: this is most frequently used and is a source

that parents can use to borrow money to cover the full cost implication of education less the aid received. Repayment for such a loan frequently starts sixty days from the date the loan is granted.

* Private loans for parents: these come from a extensive range of lenders and typically bear a high interest rate.

* College sponsored loans: the source is uncommon due to the fact that only a very small number of colleges have the funds for such a facility. The onus is on you to verify with the college what options are available.

By now you are becoming familiar with information regarding student loan options and prior to ending this topic; we have five money-saving guidelines for your Federal student loan.

1. Keep checking your interest rates: student loans usually have a variable rate of interest and the rates on average change on the first of July annually. Students should ensure that interest rates increase too drastically and be prepared to take the required action for instance consolidation to lock in on a lower interest rate.

2. Automatic payments: automatic payments not only set aside the hassle of writing checks every month, but can in addition get your hands on reduced rates of interest. The student authorizes the lender to automatically remove the minimum monthly payments, by signing up for an automatic debit option, for each month from his savings accounts, hence ensuring that there are no late payments and no late payment penalties.

3. Dont default: in case of a student, having a problem in putting-together his payments for the student loan he should get in touch with his loan provider urgently to enquire if deferred payment or forbearance is probable in his case. This is vital as late payment attracts fines and damages your credit rating.

4. Choose the right payment option: there are many alternative payment options and the student must fully analyze various payment options to seek the best fit for his circumstances. By consolidating his student loans he can change to a more fitting repayment plan.

5. Incentives: some lenders offer incentives to students who make well-timed payments on their Federal student loan. The incentives can be either *cash back` or diminution in the rate of interest.

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