Education Loans

Students who are going into college or graduate school are probably looking for a way to pay for school. Most likely, these students will not have means to pay for loans without borrowing money. Therefore, it is important for them to look into kinds of student loans. A student loan is a form of financial aid that should be repaid, with interest, although the federal government will pay the interest on subsidized loans while in school. Federal education loan programs offer lower interest rates and more flexible repayment plans than most consumer loans, which makes them an attractive way to finance your education.

Education loans come in three major categories. These are student loans, parent loans and private loans. Stafford Loans can be subsidized, which means that the government pays the interest while you are in school. The Stafford Loan can also be unsubsidized, which means that you pay all the interest. However, payments will be deferred until after graduation. In order to receive a subsidized Stafford Loan, you must be able to demonstrate financial need.

Stafford Loans allow dependent undergraduates to borrow as much as $2,625 during their first academic year and up to $3,500 during their second academic year. Students who are enrolled in bachelor degree programs can borrow up to $5,500 for each remaining academic year. Independent students can borrow an additional unsubsidized $4,000 the first two years and $5,000 for remaining years in a bachelor program. Students may combine subsidized loans with unsubsidized loans to borrow the maximum amount permitted each year.

Stafford Loans have variable interest rates, which cap at 8.25% or less, depending on yearly adjustments. All lenders offer the same rate for the Stafford Loan, although some lenders give discounts for on-time and electronic payment. Repayment begins six months after graduation. You must also begin repaying a Stafford Loan if your academic schedule falls below 1/2-time.

The Perkins Loan is one type of subsidized loan, which means the federal government pays the interest while you are in school at least half of the time, and for nine months after you leave school. The interest rate is only five percent and there is a ten year repayment period. The Perkins Loan is awarded to students with exceptional financial need. This is a campus-based loan program, with the school acting as the lender using a limited pool of funds provided by the federal government.