Student Loans Help Pay For College

Figuring out how to pay for college is often difficult and confusing for students and parents. You made the right decision to search for and utilize scholarships to help pay for tuition. But the truth is, you may need to look beyond scholarships in order to cover the full cost of your education. Below is detailed information about the different types of student loan programs available.

Federal Student Loans

Federal student loans supply financial help for students enrolled at schools that participates in federal aid programs. A "school" is defined as a two-year or four-year public or private college, university, or trade school. These loans are offered by private organizations under accordance from the U.S. Department of Education through the Federal Family Education Loan Program (FFELP) and the Federal Direct Student Loan Program (FDLP).

Federal student loans generally cover school expenses, including tuition and fees, room and board, books and school supplies, as well as any transportation. Loans can also help pay for technology needs (i.e., a computer) and for necessary dependent care.

There are a variety of federal student loan programs, the list that follows covers most of them. Check with your school to see which programs they participate in.

Stafford Loans are federal student loans made directly available to college and university students and are used to supplement personal and family resources, scholarships, grants, and work-study. They may be subsidized by the U.S. Government or may be unsubsidized depending on the student's financial need.

Both subsidized and unsubsidized loans are guaranteed by the Department of Education either directly or through guarantee agencies. Nearly all students are eligible to receive a Stafford Loan regardless of credit score or other financial issues. Both types offer a grace period of six-months, which means that no payments are due until six-months after graduation or three months after the borrower becomes a less-than-full-time student without graduating. Both types have a fairly modest annual limit. The limit for the academic year beginning in 2007 is $3,500 per year for freshman undergraduate students, $4,500 for sophomore undergraduates, and $5,500 per year for junior and senior undergraduates.

Learn more about the Stafford Loan or apply for the Stafford Loan online.

Parent PLUS Loan

The Parent PLUS Loan is available to parents of students enrolled at least part-time in a program included within a formal list of participating post-secondary institutions. PLUS loans differ from other federal student loans like the Stafford and Perkins loans in that it can cover a larger amount of the cost of education, has a higher interest rate and the commitment is undertaken by the parent, rather than the student. PLUS Loans are also available for graduate and professional students.

Graduate PLUS Loan

The Graduate PLUS Loan is similar to the Parent PLUS Loan in the way it is an unsubsidized, federally guaranteed loan, up to the cost of education. This loan is taken out in the graduate student's name, on their own signature and credit rating. Federal loan deferment and forbearance options are the same as the Stafford Loan so graduate and professional students can postpone repayment while enrolled at least half-time in a degree or certificate program.

Private Student Loans - The Gap Filler

Unlike Federal Student Loans, private student loans are specialized education loans based on your credit history and income and should only be considered after all federal student loans, grants and scholarships have been exhausted. Private student loans can be used for education-related expenses including tuition, books, transportation and room and board. Since many students do not have extensive credit history, they may need a creditworthy cosigner to increase the chances of getting the loan. You may apply for a private student loan at any time.

Private Student Loan Benefits

• Private student loans are not need-based
• Borrower up the full cost of attendance
• Six-month grace period after graduation while you find a job

Private Student Loan Eligibility

• Must be enrolled at least half-time at an eligible school
• Must be a U.S. citizen or permanent resident or have a cosigner who is
• Many borrowers will need a cosigner. Borrowers without a cosigner must have at least 27 months of established credit history.
• Borrowers need to provide proof of enrollment, which includes one of the following: a tuition bill, award letter or recent transcript that is no more than 90 days old from the school the loan is for. Documents must include the student's name, enrollment period, and name of the school. Enrollment period must include the enrollment period you provided on the loan request

Private Student Loan Repayment Options

Typically, private student loan lenders offer three separate repayment options including deferment or repayment of interest only or interest and principle.

Full Deferral: No principal or interest payments due while enrolled in school (up to four consecutive years). Payment of principal and interest will begin 6 months either after graduation or if no longer enrolled at least half time. Interest will continue to accrue during the deferment period and will be capitalized (added to the loan balance) at the time of repayment.

Interest Only: Pay only accrued interest while enrolled in school (up to four consecutive years). Payment of principal and interest will begin either 45 days after graduation or withdrawal from school.

Immediate Repayment: Payment of principal and interest will begin 45 days after loan is disbursed.

Disbursement of Private Student Loan Funds

Once you receive conditional approval, you will complete a promissory note and be required to submit documentation to verify the information on your application. If you return the requested documents quickly, you will receive your money soon afterward - it typically takes about 14 days but it can take as little as five business days after your conditional approval.

A check will be sent directly to you at your mailing address. Keep in mind, if you have a cosigner, the check will be made co-payable to both of you.

Additional Benefits of the Private Student Loan

• If you choose full deferment, payments do not have to start on the private student loan until six months after graduation or dropping below half-time status
• You are not required to make payments while you are enrolled at least half-time in school
• Some lenders will offer a 0.25% interest rate deduction for setting up automatic payments from a bank account during repayment

Learn more about Private Student Loans or Apply Online

Perkins Loan

The Perkins Loan is a low-interest federal student loan for undergraduate and graduate students. In the case of Perkins Loans, the college acts as the lender, drawing funds from a small pool of money provided by the federal government. Perkins Loans are awarded based on exceptional financial need.

Finding Scholarships

Last year, there was over $31 billion in unmet financial need. You don't need to be one of the students who don't get all the financial aid they need. Search for scholarships for yourself and feel free to submit links to those that you find on your own. Visit Student Scholarship Search for more information.

Start Building Credit

Building a good credit rating can help you secure lower interest rates for private student loans or when you decide to consolidate your student loans. Opening a low interest credit card with small credit limit is a great way to start building credit history.

Financial Aid News

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