Student Loans

Unlike scholarships, grants and suchlike, student loans are money borrowed that must be paid back along with accrued interest. Just as car loans or mortgages are supposed to be repaid over an agreed tenure, student loans too are real loans that have to be repaid during the course of education or once the education is over depending on the terms of the loan agreement. This means that student loans, once consummated, cannot be canceled on any grounds like discontinuation of education or financial difficulty. Student loans are therefore a serious obligation and it is incumbent on you to fully understand your responsibility before taking out a loan.

Depending on your requirement and loan terms, there are several types of student loans to select from, principal among which are as under:

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• Federal Perkins Loans
  
  These are student loans that are made available through participating institutes to undergraduate as well as graduate and students. The U.S. Federal Department of Education provides a programmed amount of funding to your institute, which in turn decides which students ought to have the loans. In most cases, the institute may combine federal funds with some of its own funds for loans to qualifying students. Perkins student loans have 5% fixed rate of interest, may not have associated processing fees and come with longer grace period.To apply for this student loan program, you must complete the Free Application for Federal Student Aid (FAFSA). Usually, you will receive the loan in at least 2 installments during an academic year. Normally, your institute will pay you directly by check or adjust your student loan to your school charges.
• Stafford Loans
  Similar to Perkins student loans, Stafford student loans too are for undergraduate or graduate and professional students for a demonstrable requirement of up to $18,500 per year, a portion of which is subsidized by the federal government. Stafford loans may come with zero or 1% guarantee fee and up to 3% origination fee. Both fees are deducted from loan amount before it is sent to concerned school.Stafford loans too need completing FAFSA. Capped at 8.25% interest or less, depending on yearly adjustments, Stafford student loans are made available through one of the two U.S. Department of Education programs

William D. Ford Federal Direct Student Loans Program — referred to as

Direct Stafford Loans or Direct Loans

The Direct Loan Program is one of the Federal Student Aid (FSA) programs offered by the Department of Education. If your institute is a participant in Direct Loan Program, you will need to complete a Master Promissory Note (MPN) in addition to FAFSA. The MPN explains the loan terms and is legally binding on you. For more information, click here.

Federal Family Education Loan (FFEL) Program — known as FFEL Stafford Loans or Federal Stafford Loans

The FFEL Program is a federally insured educational student loan program administered by the U.S. Department of Education. Usually FFEL student loans are available as Stafford subsidized and unsubsidized (for undergraduate and graduate students) and the PLUS (for parents of dependent undergraduates). For more information, click here.

• PLUS Loans
  These are student loans that parents can take out for their dependent undergraduate children and are made through either Direct Loan or the FFEL program mentioned above. Though not necessary, students are encouraged to file FAFSA so as to be able to receive maximum aid vis-à-vis eligibility. Your parents may apply for either Direct PLUS Loan or FFEL PLUS Loan for you, but not both during the same enrollment period. More information can be had here.
• Consolidation Loans (Direct or FFEL)
  As the name suggests, here you may combine (consolidate) multiple federal student loans into one, which will be either a FFEL Consolidation Loan or a Direct Consolidation Loan. This will permit you to make just one monthly repayment. Consolidation student loan may result in significantly lower overall payment at perhaps lower interest rates. Moreover, you may choose a longer repayment time (up to 30 years).Your parents can also avail a Consolidation Loan if they already have a PLUS Loan for you.

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