Students who are aspiring for higher education and great jobs face some tough financial decisions. There is only a small percentage of students who can afford to go to their favourite colleges or universities to pursue their dream degrees without applying for loans. The majority of the student population depends on financial aids to get their higher education.
Federal loans Vs. Private loans
Quick Content For Students
Any student, who is thinking to get financial assistance, goes through the hard phase- Federal loans or private loans? The best way is to consider Federal loans as the primary form of financial assistance.
Federal student loans
Federal Government backs the Federal loans. They can be:
- Direct Subsidized Loans or Direct Unsubsidised Loans- These loans have better schemes to assist students.
- Direct Plus Loans-These loans are granted to students, professionals or parents to pay the educational fees.
- Federal Perkins Loans-These are low interest loans granted by Federal Perkins Loan programme.
Students are advised to utilise their available resources to fund their studies. Students should consider for Federal Loans before they embark on applying for a private loan.
Federal Loans enable students to:
- Pay a low-interest rate that is fixed.
- Apply for the loan even with a bad credit as for most of the Federal Loan plans credit checks are not required.
- Co-signer is not mandatory for Federal Loans
- In some instances, loan forgiveness for those who work in public Service domain.
However student should also consider some of the cons of Federal loans such as:
- Federal Loans do not allow private loan consolidation
- Federal loan programs such as Perkins loans’ benefits can get annulled upon loan consolidation.
- Consolidation of loans also cancels the six month’s grace period for loan repayment.
- Loan consolidations are allowed only once.
- The Federal Loan amount is limited.
- In spite of all the advantages and disadvantages students are encouraged to consider Federal Loans before applying for a private loan.
How to apply for a Federal Loan?
To avail Federal Loans students are required to fill out FAFSA application and contact their school finance office for further assistance.
Once you have applied for Federal Loans and utilised all the resources, consider researching about private loans.
Considering private loans
As good as Federal Loan sounds; there are few downsides to it.
- Though Federal Loans offer low-interest rates, private loans have low monthly payments. Federal Loans are for fixed term of 10 years, but private loans have longer loan repayment periods.
- Families are required to fill out FAFSA to avail a Federal Loan. But some may feel uncomfortable to disclose all of their financial information. Private loans do not seek such in-depth financial information, and they have simple application procedures.
- Students with low grades or poor academic performance (GPA less than 2.0) have to opt for private loans to realise their dreams as they won’t get Federal financial aid.
Getting a dream degree is an expensive affair. It is no surprise that during2001-2010 the education expenses for university education peaked at 23-38 percent. However investing in education is one of the best things in life because knowledge is everything. At the same time if one is not smart enough he or she can end up with a huge amount of debts to clear.
However investing in education is one of the best things in life because knowledge is everything. At the same time if one is not smart enough he or she can end up with huge amount of debts to clear.
Students should never take loans lightly; they are certainly not free money. Students should make sure that they genuinely need private loans before applying. First, students should consider these factors:
- Can I pay this loan? If yes, how can I promise prompt repayments?
- When can I clear off my debts?
- Will I be able to consolidate many debts of mine into a single loan?
- Does my lifestyle allow me to make smart financial decisions for my future?
- Do I know everything about the Post Grad programme/University?
- How is the job market for such Degree programme?
Once you brainstorm and make your decision to apply for a private loan, start researching about various lenders, loan plans and products. Know about interest rates and loan costs. Consult loan specialists and ask questions about grace periods, repayment plans and options.
Researching about the private loan can be time-consuming, and this is where we can assist you, with our trained staff helping you to make the right choice.
Manage your debts effectively
You may avail one of the best private loans to fund your higher education, but if your debt management is bad, your purpose is not served. Bad debt management can lead to trouble down the lane. Debt management is an art.
- Once you procure the loan, be informed about your repayment terms and conditions.
- Pay the debt amount on time to avoid any late payment fees and possibly a bad credit score.
- Never misuse the loan amount. You may feel the financial freedom once you get the financial support but remember that you are in debt. Utilise the loan amount only for your educational expenses.
- Consider getting a part-time occupancy to help your tight budget. Few hours of extra work can help you to repay on time.
- Large amounts of debts are overwhelming, and students are at greater risk of getting stressed out as they need to work to get their degrees and manage the debts. It is better to take each day as it comes. If you plan your finances well, streamline your lifestyle, you can keep the unwanted stress at bay.
Private loans can be very helpful
After researching information about student debts, you may get worried about the tight budget and constrained lifestyle post private loan. But take a look at these findings by the Urban Institute about student debts:
- People who complete their college degrees worry less about student debts. After graduation earning avenues that become available to a graduate.
- People who complete their college degrees most likely benefit at their workplace.
- A college graduate’s earning potential is 84 percent more than a high school diploma holder.
- Because of the college degree, most of the students clear their debts as they can get good jobs.
Choose the best lender
Students can make a list of lenders based on factors such as loan costs, repayment plans and schemes. The lenders should be able to help the students with information about various loan products and services. Hence, it is very important that the lender has a good team of Customer Care Executives and loan specialists to assist students and parents in the decision making.
Students should be able to reach their lenders easily. Lenders should be student-friendly; they should focus on helping students to get best interest rates, low monthly payments and convenient loan repayment options. Anyone, focusing solely on profits instead of people is not going to be helpful.
Lenders consider applicants with good credit scores and history. The credit scores tell them that you can repay the loan amount as agreed. Most of the lenders ask for a co-signer for additional security. The co-signer can be anyone with good credit history, who can promise them that you are capable or repaying the loan amount.
In case of bad credit scores, the applications can get rejected. However once rejected students can find a co-signer with credit worthiness and apply again.
A lender’s role in helping you decide the right loan scheme is very vital. Choose us as your trusted loan adviser and lender. We understand our role that has a great responsibility, and we will make sure to guide you in your educational loan journey to help you realise your goals and dreams.
Students who dream big can carefully consider their options for financial support to fund their studies. Ideally their first choice should be Federal loans. When they have exhausted their resources or do not qualify for Federal Loan, they can always opt for private loans.
Private loans can help the students to get their dream degrees and after that dream jobs.
However to reap the maximum benefit from private loans one must carefully consider many factors such as choosing the right lender and right loan plan, sticking to a determined action plan after getting the loan, utilising loan only for educational purposes and planning the proper and timely repayment of the loan amount.
Private loans will not be burdensome if managed. Students must be aware of the pros and cons of financial assistance and make their decision based on the well researched information. People invest in many things but investing in education and future is one of the best things in life. With some careful considerations and planning students can take use of the private loans to make their educational wishes come true.