Student Loans

Finance your education with a school loan

With the cost of a four-year college degree skyrocketing, many students can't make ends meet without an education loan. While many colleges and graduate schools have an in-house student loan program of some sort, which guarantee that students who have been accepted to the institution will be able to access the funds they need to enroll, it still pays to know your options.

Student loans are widely available from the government as well as financial institutions, including banks as well as private lending companies. If you're in the market for a school loan, it's important to your financial future that you understand the technical ins and outs of how they work.

Borrowing and Repaying Student Loans

If you want to get a federal student loan, you should know the difference between federal Stafford loans and federal Perkins loans. Perkins loans are for students with a demonstrated financial need. You can be enrolled in school full-time or part-time, and students at both the undergraduate and graduate level can qualify. They are made available through participating schools, and loan repayment is made directly to the institution.

Stafford loans are similar, except you must be enrolled in school at least part-time to qualify. They also differ in that there are two types of Stafford federal student loans: subsidized and unsubsidized. You must demonstrate financial need to qualify for subsidized loans, but you don't have to in order to get unsubsidized ones. Subsidized Stafford loans are offered with more advantageous interest rates and repayment terms.

In both cases, you get a grace period before you have to start repaying the loan. For Stafford loans, you get six months from the time you complete your schooling; Perkins loans allow nine months.

If you cannot cover the total cost of your education with a Stafford or Perkins loan, you can supplement with a private student loan. The vast majority of private student loans are structured similarly to federal ones, with grace periods before repayment comes due.

Student Loan Interest Rates

Your loan's interest rate will depend on whether it's a federal or private loan, subsidized or unsubsidized. Generally, federal loans have lower interest rates than private ones, with subsidized loans having the lowest interest rates of all. In most cases, student loan rates are tied to the prime rate set by Wall Street.

Because students often have a hard time finding high-paying work coming straight out of school, student loans are usually amortized over a long period of time. If you're having trouble making your payments, talk to your lender about loan refinancing. This can make your monthly payments more affordable.

Keep in mind that declaring bankruptcy will not get you off the hook for your student loans. Be responsible about your financial planning and your future if you need to take out school loans to finance your education.

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