Student Loans Simplified
Choosing the right college loan(s) will help students finance their education and avoid a bad experience when repayment becomes due. Failure to understand the rules and the options, on the other hand, can lead to unpleasant surprises and serious financial difficulties.
Student loans are separated into two categories; subsidized and unsubsidized. The chief difference between the categories is who is responsible for the interest during the time a student is actively enrolled in a college or university.
Subsidized student loans are limited to students who demonstrate financial need: students whose incomes are not sufficient to meet college costs. There is a fixed limit on the subsidized loan money students may borrow, but the government pays the interest on such loans while students are enrolled in college and during the first six months thereafter.
Unsubsidized loans require no financial need; everyone is eligible to apply for them, and they are available in larger amounts than are subsidized loans. However, students are responsible for the interest payments, thus the term “unsubsidized”..
Generally, students who qualify for unsubsidized loans need the maximum they are allowed to borrow. If they require additional funds, unsubsidized loans are also available to them.
Students can apply for the Perkins Loan or the Stafford Loan. Repayment of both begins six months after a student has graduated, stopped out, or dropped out. When there is good reason, lenders will frequently extend this six month grace period, although they are not obligated to do.
There is also the PLUS loan, which can be taken out by parents. The PLUS loan offers a relatively low interest rate, but requires repayment to begin sixty days after the loan is awarded.
Please be aware that student loans must be repaid, without exception. Even bankruptcy does not free borrowers of the obligation of full repayment. Generally, lenders will work with anyone making a good faith effort to repay their loans, but those who avoid contact with lenders or simply refuse to make payment may be subject to harsh penalties which including wage garnishment and the withholding of income tax refunds.
Loans are a great way for students to help finance their educational costs. In fact, for most people, they are the best investment they will ever make. But it is important to borrow no more than needed and to repay your loans on a timely basis.
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