Getting over the trouble to pay for education bills.
autumn marks the beginning of new sessions of the school, and
with it, for some families, comes the anxiety of arranging funds
and paying for the educational bills. Thankfully the Federal
government is quite considerate and has made provisions for
several types of financial aid to help such families.
Some parents from the middle income group have high incomes
which rule out there chances of getting a need based financial
aid. But their income may not be high enough to take care of
all the college expenses and so they pick up Federal education
loans to get their educational bills reimbursed.
There are two main financial aid programs available for the
parents, made available by the U.S. department of education.
These are the unsubsidized Federal Stafford loan and Federal
Plus loans. Those parents who have
not used any need based or merit based financial aid for their
childs further education are eligible for these Federal guarantee
loans which come with a comparatively low rate of interest.
Both these loan programs can be used by the parents to cover
up all kinds of expenses related to education such as books,
living expenses or travel expenses, provided no other financial
aid has been used for the purpose. A great advantage of using
such loan programs is that tax deductions are available either
for the complete amount or for some portion of the interest
that you pay on these loans.
College loans are a confusing subject for most parents, especially
so because theres not much of information available on the
loan programs initiated by the U.S. department of education.
Ignorant of the provisions made by the department of education,
some of the parents use the wrong source of funds to pay for
higher education. Quite often credit cards are used which usually
carry a very high rate of interest of nearly 22 percent, also
the parents go in for a refinance on their home or use some
other expensive source of finance not knowing much about the
programs offered by the Federal government. In the process they
end up losing a lot of their hard earned money, which could
have easily been saved had they used a federally guaranteed
loan with a lower rate of interest.
Federal loans are any day a better option when compared with
credit cards or refinance mortgages, for the reason that the
rate of interest is usually low, there are no application fees
and processing charges and tax deductions are also available
for the interest paid over federally guaranteed loans.
Federal PLUS loans: with these loans the parents
can borrow adequate funds to cover up the cost of education
of their children. In case any other aid has been used, then
they are eligible for a loan amount equal to the total cost
of education less the received aids. The interest rates applicable
on these loans usually changed on the first of July every year
by the Federal department of education.
Of the two Federal guaranty loan options available for the parents
the PLUS loans are the
most preferred and easily available, so you will find that this
option has been covered up in detail in this article. Plus
loans stands for Parent Loans for Undergraduate Students,
and unlike most of the loans available for students, the parents
can borrow much more under this loan program. Usually the amount
that can be taken is good enough to cover up the entire cost
of education. However, there is no provision for a grace period
and repayment plan starts off immediately. Under this loan program
the parents do not act as the cosigner, and the liability to
pay back for these loans is entirely on the parents and not
on the student.
If the parents default in such loans, the consequences would
appear on their credit reports. While the parents have the option
of paying back the loan within one year or over four years,
it is advisable that they proceed with a four year loan so that
the payments remain affordable and no problems arise.
There has been a slight amendment in the legislation and it
is now possible even for the graduate students to pick up Plus
loans in their own name. The rate of interest and the terms
and conditions remain the same even for the students.
loans are not need based, so can be picked up by any students
parents and over the years they have emerged as the smartest
way to manage the load of education. The total amount of loan
that can be taken can encompass all types of education costs
such as tuition fee, boarding and lodging charges, books and
supplies, laboratory expenses and even travel expenses. These
loans are federally insured and require no collateral to be
furnished by the parents. A great benefit for the parents is
that the interest paid on such loans gets them tax deductions.
Also if the parents propose to pay back before the term there
are no prepayment penalties applicable on these loans.
From the first of July, 2006 some changes have been made to
the PLUS loan program and now these loans come on a fixed rate
of interest. The currently prevailing rate of interest is around
8.5 percent; however price competition can get you somewhat
lower rates and added incentives.
Federal Stafford loans: these are also federally
guaranteed loans which can be used to cover up the total cost
of education. These come with on a variable rate of interest
and the interest that is charged during the grace period, the
deferment period and the repayment period will all vary.
Both these Plus loans are available
either directly from the department of education or through
educational loan brokers, but it is advisable that you proceed
directly because going through a broker will bring in a lot
of added costs.
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