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Student Loans

Thursday, 17 Feb 2011 11:16 AM


A student loan, also called an education loan, helps students pay for college tuition, books, and living expenses. The student loan carries a much lower interest rate. Repayment starts about a year after the student leaves school.
 
Student loans come in three major formats: student loans (like Stafford and Perkins loans), parent loans (like PLUS loans), and private student loans.
 
Private student loans are also called alternative student loans. A distinct type of education loan called consolidation loan is also available. Here, the borrower can consolidate all the loans into a single loan. This makes it easier to repay the loan. New student loan products are introduced periodically - like the peer-to-peer education loans.
 
Federal education loans are available in the form of direct loans or federally-guaranteed student loan programs. Federally-guaranteed loans limit the interest rate and the fee the lender can charge. Deduction is allowed in federal income tax returns in respect of interest on student loans taken under the federal program.
  
Students should tap the federal government loans first. These loans carry a lower interest rate. They do not involve credit checks or collaterals. The repayment schedule can suit the student’s convenience. Extended repayment periods are possible. Federal Stafford and Federal Perkins loans are also student loans.
 
Federal loans for students come in two formats:
 
The Federal Family Education Loan Program or FFELP under which loans are provided by private lenders like banks, credit unions, savings, and loan associations. These loans are guaranteed by the federal government.
 
The Federal Direct Student Loan Program or FDSLP, under which the loans are provided by the U. S. government directly to the students and their parents.
 
Stafford loans may be subsidized (the government pays the interest as long as you are in school) or unsubsidized (you pay the interest but you start making the payments only after you graduate).
 
Stafford loans are available for undergraduate programs and beyond.
 
Sources of Educational Loans for Students:
Colleges generally publish their own preferred lender lists for each loan format. Thus, the lender lists can furnish sources for undergraduate Stafford loans, parent PLUS loans, graduate Stafford loans, graduate PLUS loans, consolidation loans, and private student loans.

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