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Going to college is a crazy experience. A lot of stress comes with the entire process. You not only have to choose a college and get accepted, but you have to figure out how to pay for it. In today’s dry economy, paying for school is nearly impossible. The sad part is, if you don’t go to school you will most likely suffer later on. Once upon a time a guy could work at any number of factories in the United States with no college education necessary. That is no longer the case, which is why you have to figure out how to pay for school no matter how tough that may be.
The most common source of money when it comes to paying for college is through student loans. Student loans can be really confusing. Understanding how student loans work is not something that is simple for most people. No matter how many times you go over the money, nothing makes perfect sense. You have to know, there are options.
The Two Categories of Student Loans
When it comes to choosing a student loan, there are two main categories. These categories hold a lot of options and almost every loan option can fit in one of them. Federal Education Loans is the first category out of these two. Federal Education Loans are provided by the federal government, instead of just your state’s government. This only means that the rules with these loans are the same for every state. These loans include the Perkins Loan, Direct Stafford Loan, and the Direct Parent Plus loan. The second category is the Private or Consumer Loans option. This category includes Private student loans from places like banks and also Consumer Loans which aren’t especially for education. Federal Perkins Loans
Federal Perkins Loans are given based on need. These loans are taken out by the student themselves, not the parent and are only given after they have filled out a FAFSA form and have been deemed in need. Basically, these loans are for students who need the loan due to financial burdens and have no other means to pay for college. They are only available at some schools, and are worth up to four thousand dollars per year. The maximum you can borrow with these loans is fifteen thousand dollars. These loans are also only available to some students, there is a limit. The government pays all the interest, so this loan is interest free while you are in school for those who qualify. If you drop down from being a full time student to a half time student, you have nine months before you have to start paying on the loan with five percent interest. Otherwise, you don’t have to pay until nine months after you graduate. Direct Stafford Loan
With a Direct Stafford Loan the student is the one who is borrowing the money. Meaning this loan will be in your name, not your parents. This loan could be subsidized or unsubsidized. Subsidized loans are interest free for you while you are attending school full time, and unsubsidized include interest while you are in school. Subsidized Direct Stafford Loans are given based on needs. This means that you can only receive one if you have filled out a FAFSA form and need the help by the government’s standards. Just about anyone can receive unsubsidized loans, because they are not based on needs. You have six months to start repaying this loan, instead of the nine months given with Federal Perkins Loans. These loans can be up to twenty three thousand dollars throughout the entire four years of college. Direct Parent PLUS Loans
These are loans that are taken out in the parents name and are based on good credit. Direct parent PLUS loans are never subsidized. Payments have to start being made sixty days after you receive the loan. Basically, these are loans that your parents can take out for your education as long as they have good credit. They are not based on need, but only based on credit. Your parents have to begin paying off these loans sixty days after they receive the full amount. Private Student Loans and Consumer Loans
Private Student are loans that are not given by the federal government. Usually these loans come from banks, and the terms depend on the institutions policies. A lot of college financial aid offices have a list of lenders that they prefer you use and these loans are most often in the student’s name sometimes with a co-signer. Consumer Loans are basically just loans from a bank that are not only for education. They can be personal loans, home equity loans, or collateral loans.
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