Federal
Student Loans versus Private Student Loans – which is
best for me?
by: Vanessa McHooley
Federal
Student Loans versus Private Student Loans – which is
best for me?
You have
gotten all the grants and scholarships you can, but you
still need money for your education. It’s time to look
at loans. But which is better – federal loans or private
loans?
Federal
loans
If you
need to take out a loan to help pay for your education,
you should always look at federal loans first. The
largest source of education loans around, federal loans
are long-term loans with low interest rates designed for
students who need money for their educations. They have
several benefits when compared to other borrowing
options, including
Eligibility for some of these loans, such as the Federal
Perkins Loan and the Subsidized Federal Stafford Loan,
are needs-based, while others are not. You will need to
complete a FAFSA to apply for these loans.
The most
common federal student loans are listed below:
Federal
Perkins Loan
The
Federal Perkins Loan is a low-interest loan available to
students who have exceptional financial need, based on
the information provided on their FAFSA. Undergraduates
can borrow up to $4,000 per year, while graduate
students can borrow up to $6,000 per year.
Federal
Stafford Loan
The
Federal Stafford Loan is available to undergraduates and
graduate students. Loan amounts depend on a student’s
year in school and whether they are financially
dependent or independent. Your college’s financial aid
office determines your eligibility.
Stafford
loans can be subsidized or unsubsidized. Financial need
determines which type a student is eligible for.
Subsidized loans are based on financial need. The
government pays the interest while the student is in
school, in deferment, and in their grace period.
Unsubsidized loans are available to all students,
regardless of income. The student is responsible for all
interest.
Federal
PLUS Loan
The
Federal PLUS Loan (Parent Loan for Undergraduate
Students) is a low-interest education loan for parents.
Each year, parents can borrow up to the cost of
attendance, minus other financial aid received
(scholarships, grants, student loans, etc.).
The PLUS
loan is not based on financial need. Qualified
applicants must pass a credit check.
Private
loans
Private
loans are designed to supplement federal loan programs
and are available from schools, banks, and education
loan organizations. They are usually used to cover
education costs that cannot be met by federal aid.
Terms
for these loans vary according to the lender and your
credit history. Keep these things in mind as you
consider taking out a private loan:
-
Private loans have credit requirements, and you may
need a co-signer
-
The
lender determines the interest rates and fees, which
may be affected by your credit score
-
Private loans may not offer deferment options
-
Private loan programs may offer borrower benefits,
such as interest rate discounts or rebates
No
matter what type of loan you take out, be conservative
and borrow wisely! All loans have to be repaid, whether
federal or private.
This
article is distributed by NextStudent. At NextStudent,
we believe that getting an education is the best
investment you can make, and we're dedicated to helping
you pursue your education dreams by making college
funding as easy as possible. We invite you to learn more
about Federal Student Loans or Private Student Loans at
http://www.NextStudent.com
