The government of America believes that each and every person has a right to education and hence student loans have been made available. Student loans are financial grants that can be used by the student to pursue or complete their education. There are many types of student loans that can be used by undergrads, graduates etc. Let us now look at some of the loans and their types.
Federal loans
These student loans are the more recommended option and have terms that you will find more favorable to you. The rate of interest will be lower than private loans.
The loans include the federal Stafford loan which is the most popular type of student loan. This is a fixed rate and low interest loan. It is available for undergraduate students and is widely used across America. It has an interest rate of 6.8% and other fees like the origination fee is also applicable. It has loads of flexible repayment options. Consolidation is also possible in this kind of loan.
The federal Perkins loan is a low interest loan for students who need a large amount of money. This loan has an interest rate of 5%.
The federal parent plus loan is for the parents of students who are dependent. The parent can borrow up to the full cost of education minus any other aid that the student has received. This loan has an interest rate of 8.5% and there are many repayment options also available. A credit check however is required in this type of a loan.
The federal graduate plus loan is for students who wish to attend graduate school. The student must however have exhausted the eligibility for the Stafford loan before he can be eligible for this one. Interest rate is once again an 8.5%, however you can work with organizations like sally Mae to get it reduced to 6.75%.
Private Loans
If you as a student have exhausted your eligibility to get any more federal loans, then you can use private loans. These are on the expensive side and do not be surprised if you find the interest rates to be higher than federal loans.
The signature student loan is the most popular ones after the Stafford loan. You must be in good academic standing to be eligible for this one. There is no limit on what you can borrow, so you can borrow your entire cost of school as well from this one. If you opt for Sallie Mae, they can help you get lower interest rates than conventional private loan programs.
The next in line is the student answer loan that lets a student borrow any amount from $4000 to $40000 a year for any expense related to college.
Repayment and Problems
Despite all the convenience that the student loans offer, many students still fall into trouble while trying to repay their loans. There are several reasons why this happens. A student usually has a time frame in mind in which he would land a job and start to repay the loan. But many a times he is unable to land a job within this time frame. The normal time frame allotted by most lenders is 6 months. So if the student cannot land a job in 6 months time, then he starts to default payment. A student can apply for forbearance or suspension of payments in such times. He can also choose to reduce the cost of living for a few years until he is stable enough to start paying the loan in time.
Friday, February 9, 2007
Don''t Pay Your Student Loans, Have them Forgiven
Okay so you went to college, had a good time, went to a few parties, studied hard (hopefully) and graduated. So its six months later and time to pay back those student loans, but wait wouldnt it be great if you didnt have to pay back your student loans? I know what you are thinking, YES!!!!
The Federal Government has put together several programs that will allow your students loans to be forgiven. That means for certain people employed in certain occupations you will not have to repay your student loans. So pay attention I might just make your day and trust me the list is longer than you may think.
Here are some of the professions that qualify:
Full-time teachers employed in public or nonprofit elementary or secondary schools in districts eligible for ESEA Title I-A funding, where the percentage of children from low-income families enrolled in the school exceeds 30% of total enrollment
Full-time Head Start staff
Full-time special education teachers in public or nonprofit elementary or secondary schools (including teachers of infants and toddlers) or qualified professional providers of early intervention services under the Individuals with Disabilities Education Act (IDEA)
Members of the Armed Forces for service in an area of hostilities
Volunteer service under the Peace Corps Act or the Domestic Volunteer Service Act of 1973
Full-time law enforcement or corrections officers (including prosecuting attorneys, but not public defenders), for service in local, state or federal law enforcement or corrections agencies
So really I know its good to give back to the community but now if you are employed in any of the above professions you get an extra incentive. You can have anywhere from $5,000 or up to 100% of your student loans forgiven, it really depends on your profession and how long you have been employed.
The Federal Government has put together several programs that will allow your students loans to be forgiven. That means for certain people employed in certain occupations you will not have to repay your student loans. So pay attention I might just make your day and trust me the list is longer than you may think.
Here are some of the professions that qualify:
Full-time teachers employed in public or nonprofit elementary or secondary schools in districts eligible for ESEA Title I-A funding, where the percentage of children from low-income families enrolled in the school exceeds 30% of total enrollment
Full-time Head Start staff
Full-time special education teachers in public or nonprofit elementary or secondary schools (including teachers of infants and toddlers) or qualified professional providers of early intervention services under the Individuals with Disabilities Education Act (IDEA)
Members of the Armed Forces for service in an area of hostilities
Volunteer service under the Peace Corps Act or the Domestic Volunteer Service Act of 1973
Full-time law enforcement or corrections officers (including prosecuting attorneys, but not public defenders), for service in local, state or federal law enforcement or corrections agencies
So really I know its good to give back to the community but now if you are employed in any of the above professions you get an extra incentive. You can have anywhere from $5,000 or up to 100% of your student loans forgiven, it really depends on your profession and how long you have been employed.
Need Help Paying Back Student Loans?
Many college students and graduates are looking for a solution for their student loan debt. While borrowers may be having difficulty paying back student loans, there is help. Solutions for paying back student loans are available.
What causes difficulty in paying back student loans?
New college graduates may find that it takes them longer to find a job than they expected. While there's a six month grace period from the time students graduate until repayment begins, sometimes it takes six months or longer to find a job.
Many recent graduates who are employed are underemployed -- working part-time or temporary jobs until they find a permanent position. During this time they may need help in making loan payments.
New college graduates can use several strategies to help with student loan repayment. Taking on additional part-time jobs or freelancing may be an option.
It is also wise to keep living expenses low the first few years out of college. Graduates can live with a roommate, or downsize into a smaller apartment. If new graduates are still looking for a job, it may be a good idea not to move until permanent employment is found. Then it will be easier to move to an area closer to the job.
Applying for a forbearance may be an immediate solution for times of difficulty making loan payments. A forbearance is temporary period of suspension of payments on a federal or direct loan after repayment has begun, and if the student does not qualify for deferment.
This means that if a student has already started paying back loans, they can apply for a suspension of payments on the grounds of financial hardship. A forbearance must be applied for through the lender. Being able to hold off payments for a few months can be a big help during a time of financial hardship.
Another student loan debt solution is to consolidate payments. Unless consolidated, each student loan is accounted for and paid separately. When a student graduates they will receive paperwork and payment slips for each loan. 2, 5, 12... no matter how many loans were taken out, they will be billed separately. Adding up all of these individual loan payments could total $300-$1000 per month or more! Not many students can afford such payments.
That's where consolidation comes in. Consolidation is a process that combines all of the student loans into one loan. Borrowers can dramatically reduce monthly payments of student loans by consolidating. Average monthly payments could be less than $100 to around $250 per month. This is just an estimate. The monthly payment depends on the total amount borrowed, the interest rate and the way that loans are consolidated.
Consolidating through The Income Contingent Repayment plan is designed to help make repaying student loans easier for students who intend to pursue jobs with lower salaries, such as careers in public service. The monthly payment amount is adjusted annually, based on changes in family size and annual income. This program is only available through the US Department of Education, not a lender or bank.
Finally, the Graduated Repayment Plan starts the payments at a low level (usually interest only) and gradually increases the payments until the balance is paid. This is helpful for graduates because payments are low when the first graduate, and increase as earning power increases over the years. This plan is available by consolidating through a bank or other lender.
It is important to note that according to current regulations student loans may only be consolidated once. So borrowers who have already graduated and consolidated with a standard plan cannot take advantage of the income contingent or graduated plans. For borrowers who have already consolidated, a forbearance may be the best option for temporary relief of student loan debt.
Use the student loan repayment calculator from finaid.org to find out what loan payments could be using different types of consolidation.
College graduates can find student debt relief using one of the solutions mentioned above. Discuss loan repayment options with your lender and see what can be done to help you repay student loans
What causes difficulty in paying back student loans?
New college graduates may find that it takes them longer to find a job than they expected. While there's a six month grace period from the time students graduate until repayment begins, sometimes it takes six months or longer to find a job.
Many recent graduates who are employed are underemployed -- working part-time or temporary jobs until they find a permanent position. During this time they may need help in making loan payments.
New college graduates can use several strategies to help with student loan repayment. Taking on additional part-time jobs or freelancing may be an option.
It is also wise to keep living expenses low the first few years out of college. Graduates can live with a roommate, or downsize into a smaller apartment. If new graduates are still looking for a job, it may be a good idea not to move until permanent employment is found. Then it will be easier to move to an area closer to the job.
Applying for a forbearance may be an immediate solution for times of difficulty making loan payments. A forbearance is temporary period of suspension of payments on a federal or direct loan after repayment has begun, and if the student does not qualify for deferment.
This means that if a student has already started paying back loans, they can apply for a suspension of payments on the grounds of financial hardship. A forbearance must be applied for through the lender. Being able to hold off payments for a few months can be a big help during a time of financial hardship.
Another student loan debt solution is to consolidate payments. Unless consolidated, each student loan is accounted for and paid separately. When a student graduates they will receive paperwork and payment slips for each loan. 2, 5, 12... no matter how many loans were taken out, they will be billed separately. Adding up all of these individual loan payments could total $300-$1000 per month or more! Not many students can afford such payments.
That's where consolidation comes in. Consolidation is a process that combines all of the student loans into one loan. Borrowers can dramatically reduce monthly payments of student loans by consolidating. Average monthly payments could be less than $100 to around $250 per month. This is just an estimate. The monthly payment depends on the total amount borrowed, the interest rate and the way that loans are consolidated.
Consolidating through The Income Contingent Repayment plan is designed to help make repaying student loans easier for students who intend to pursue jobs with lower salaries, such as careers in public service. The monthly payment amount is adjusted annually, based on changes in family size and annual income. This program is only available through the US Department of Education, not a lender or bank.
Finally, the Graduated Repayment Plan starts the payments at a low level (usually interest only) and gradually increases the payments until the balance is paid. This is helpful for graduates because payments are low when the first graduate, and increase as earning power increases over the years. This plan is available by consolidating through a bank or other lender.
It is important to note that according to current regulations student loans may only be consolidated once. So borrowers who have already graduated and consolidated with a standard plan cannot take advantage of the income contingent or graduated plans. For borrowers who have already consolidated, a forbearance may be the best option for temporary relief of student loan debt.
Use the student loan repayment calculator from finaid.org to find out what loan payments could be using different types of consolidation.
College graduates can find student debt relief using one of the solutions mentioned above. Discuss loan repayment options with your lender and see what can be done to help you repay student loans
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