A student loan is a kind of loan formulated to help students afford their college education and pay for other school-related needs like books, tuition fees, and living expenses. In other words, a student loan is a capital leased from a private lender or the government to make it affordable to settle college expenses.
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What Is A Student Loan?
They are different from grants and scholarships. You need to pay these loans back to the lender (unless in rare cases where some people get part of their loan forgiven). In contrast, that of grants and scholarships do not require repayment.
They are also not the same with work-study schemes, where students work and get paid on campus.
A student loan is different from the other kinds of loans, as it comes with an interest rate that is significantly very low. And in most cases, they postpone the repayment plan until the student is through with schooling.
Types Of Student Loan
You can divide the student loan into two main types, the federal student loan and the private loan.
There is no difference between the two. Other than the federal student loans are for students given by the government. In contrast, private loans are from different companies like credit unions, banks, state agencies, and schools.
Your federal loan servicer should provide you with a student loan repayment plan that tells you when your first payment is due and how much you owe. Suppose the Direct Loans Program contacted you regarding your student loans. In that case, you can contact your credit service provider to obtain your student’s credit number, make your payments, and modify your current plan. Your Student Loan Servicer will handle the repayment of your federal student loan. You can work with your service staff to complete a repayment plan or change one of their repayment options when they are available to you.
While private student loans can vary by lender and term, federal student loans extend ten years. For example, they can offer more repayment options, and the lender can charge you in the form of a monthly payment of $1,500 to $2,000. According to the US Department of Education, repayment of a federal student loan can take up to ten years, while private student loans typically take five to 15 years. Under federal student loans, there are different types.
· Direct Unsubsidized Loan
This type of loan is a graduate or undergraduate loan where the students do not indicate financial needs. With this loan, the students involved get to pay the interest and not the government. However, the interest starts to pile up once the money is available to the school.
· Direct Subsidized Loan
In this case, students involved demonstrate financial needs according to their FAFSA (Free Application for Federal Student Aid). The government takes care of the interest until the student is ready to pay back the loan. However, once the student is through with school or, in some cases, falls below a precise duration, he gets six months of grace, after which repayment kicks in and interest start to pile up.
· Direct PLUS Loans
In this case, parents can access loans for their dependant students and graduate students for themselves. However, this type of federal loan requires a credit check and a different application form from the FAFSA.
Private Student Loans
First of all, you should note that private loans are way more expensive than federal loans and have more excellent interest rates.
Unlike federal loans, students will make payments monthly even while still in school.
Also, the lenders get to decide on the terms and conditions. Additionally, no help comes from the government as the student in question gets to take all interest expenses.
Private student loans can take between 2 and 10 weeks, depending on your bank’s policies and the loan you pay off. If your student loan is accepted, repayment can take up to 10 weeks during your studies. This aspect depends on the type of loan, the length of the loan, and your financial situation. Private student loans can last between 2 and 10 months, and you can repay them in the form of a monthly payment of $1,500 to $2,000.
Student Loan Consolidation
For student loan borrowers, a loan consolidation is an option that can simplify the repayment process for a single loan and extend repayment terms. Suppose you currently have federal student loans that are made with another loan servicer. In that case, consolidation simplifies your loan repayments by giving you access to the same loan servicing service as your federal loan but on different terms. Unlike federal student loans, private student debt has the option of deferring or reducing repayment and may have variable interest rates that can increase over the loan’s term or increase loan payments.
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The exception to federal student loans is PLUS loans, where you must begin to pay off the loan before you receive the total amount. To calculate how much interest you will pay over the term of your student loan, try using a student loan calculator.
You may find that your lender has a cap on the loan amount or cannot use the loan for your specific purpose, or you may have zero fees or a higher credit limit. Most private student loans are equivalent to the government’s student loan allowance. Still, they can fill the gaps if you have borrowed the maximum amount for student loans from the federal government, and they could have a zero fee or high credit limits.
How To Apply For Student Loans
Applying For Federal Student Loans
Applying for a federal student loan is relatively easy. First, you need to fill and submit a free FAFSA form.
You can use your guardian’s or parents’ financial information if you are a dependent student, or preferably yours if you are not dependent. The FAFSA website comes with a predictor tool called FAFSA4caster, which predicts your expected contribute.
You will need documents like bank statements, employment information, and federal tax information for the application.
Based on the outcome of your FAFSA application form, your career institution or college will deliver to you a financial assistance offer, which often comes with federal student loans. Your school, however, will tell you how to go about accepting part or all of the loan.
Nevertheless, before any loan funds are sent across to you, you must.
- Complete entrance counseling helps you understand your responsibility to pay back the student loan you are about to obtain.
- Sign an MPN (Master promissory note), subscribing to the loan’s terms and conditions.
Applying For Private Student Loans
Private student loans (loans from private bodies like banks and credit agencies) work differently from federal loans.
For the private student loans application process, some of the requirements include: being above 18 years of age, have a steady or constant income, must be a USA citizen or permanent resident possessing a valid SSN (social security number), and as well, have a decent credit history. However, you should note that the requirements vary, as each lender has its own set of requirements.
Generally, after you are through with the application process, you are matched with some lenders who are more likely to endorse or accept your request or application. An example of a website like this is credible.
You should also check out unrestrained lenders like Stride funding, which offers you income share agreements (ISAs), making it possible to base your loan payments on your income level. You are even allowed to pay nothing in a period where you earn less than the company’s lowest-income threshold. With stride funding, you can opt-in for student loan terms ranging from 5 to 10 years.
Another option is Ascent, a unique lender that offers additional freedom to attain a loan. First of all, it comes with straightforward application steps that would take just a few minutes and four steps to finish.
Amazingly Ascent has a cosigner option for those who don’t qualify for a loan because of low credit.
Best Students Loans
No matter what your plans are for college, maybe you want to head to campus or go for online training. One thing is sure; you will indeed require to pay some fees and cater for personal expenses. Federal loans are the best way to do this as they are the best affordable way to borrow, but the thing is that they are not usually sufficient. This aspect is where private student loans come in. Here is a list of the best student loans you need to check out.
1. Citizens Bank
Citizens Bank provides private loans for graduates, undergraduates, and parents.
|Loan type:||undergraduate, graduate, and parent|
- Permits International students to apply for loans as long as they have a cosigner from the US.
- Give’s multi-year approval.
|Loan Type:||MBA, parent, dental, undergraduate, graduate|
- No late fees
- Allows borrowers to select the repayment period.
RISLA stands for Rhoda island student loan authority. It is a nonprofit organization that assists parents and students in finance college.
|Loan type:||refinancing, graduate, undergraduate|
- No prepayment fee charges.
LendKey is an online platform that unites borrowers aspiring for loans with community banks.
|Loan types:||medical, graduate, undergraduate|
- No application fee
- Borrowers can evaluate numerous lenders in one application.
U-fi offers private loans to students. Accessible in 49 states.
|Loan types:||parent, graduate, undergraduate|
- 25-year repayment terms
- Permits complete or interest-only payment options
PNC operates in 50 states and offers loans with variable and fixed rates.
|Loan types:||undergraduate, graduate, medical, parent|
- It gives out a range of loans
- Interest-rate discounts.
7. Sallie Mae
Sallie Mae is a traded consumer bank. Offers private student loans to graduates and undergraduates
|Loan types:||MBA undergraduate, dental, parent, graduate|
- Great customers service
- No origination fee.
SoFi is an online lender present in all 50 states providing student loans for undergraduates, parents, and graduates.
|Loan types:||parent, graduate, dental, undergraduate|
- Loan terms of 5 to 20 years
- No application fees.
What Happens To Student Loans When You Die?
· Federal loans
One significant benefit of a federal loan is that the government discharges all loans upon the borrower’s death.
In other words, they don’t pass down the loan to anybody in the borrower’s family.
· Private Loans
For private loans, the obligation to repay or discharge the loan when the borrower dies depends on the personal lender’s policies. For some private loans, the cosigner under the responsibility of repayment if the borrower is no more. If you are going for a private student loan, make sure to check out for any death discharge protection offer.
The Bottom Line
Applying for student loans can be a great way to take care of your college needs, but it is not a great choice, to be honest with you.
You don’t always have to finish college with loan debts, with provisions like scholarships and grants, work, choosing a school you can afford, and the rest, graduating without a student loan debt is attainable.