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Student Loans and Alternative Education Funding Options

[Jun 14, 2008.]


While many high school graduates may not have a problem with being accepted into a college or university, they may have a problem when it comes to paying for that higher education. While the economy fluctuates and the job market weakens college bound students are finding it necessary to take out loans in order to assist with their academic aspirations. Debt for college students is common; however the rate at which the debt is being incurred, and the amount of the debts is sometimes to severe to keep up the payments. This is why it is important to understand what kinds of loans are available for students in order to avoid unnecessary debts and financial hardships years down the road.

College is not only a right of passage anymore but a requirement for jobs beyond the food industry and retail services. Even though there are many degree holding alumni with low paying jobs the chances that the job market will even itself out is high and so receiving a college degree is still a vital step for your career.

When available, grants and scholarships are far more ideal then loans when paying for college. Grants and most scholarships are not expected to be paid back, whereas loans are. Most loans that are used for financial aid purposes are not expected to start repayment until after the student graduates and in cases of federally approved loans have low interest rates and allow a greater length of time before completion of repayment. Finding a loan that is right for the student, where it is affordable and covers the most area, is very important. Students should not use an excessive amount of loans and instead should use just enough to help pay for their college education. While students may not have to repay the loans right away, there will come a time when they will have to, so planning ahead is crucial.

There are several types of loans offered by different companies and financial institutions but there are generally four major categories. These categories include Student Loans, Parent Loans, Debt Consolidation Loans and Private Loans.

The idea of financial aid loans is to assist the student in paying for college and will, in the best of cases, offer lower interest rates or interest rates that are paid by the Federal Government while the student is enrolled.

In the case of Student Loans such as the Stafford Loan, students can expect a low interest rate with no need for collateral or even a credit check. This type of loan is the best for students given the affordability and possibility of having the interest rates paid for. In order to receive this benefit a student must demonstrate a financial need and it is possible to combine the subsidized and unsubsidized form of the Stafford Loan in order to receive the most amount of money for college possible.

Parent Loans can be taken out by parents of students who are attending college. Most people use the Parent Loans as a way to cover costs that may not already be covered with existing financial programs such as other loans, grants, or scholarships. Such items that may not be covered include books and dorms; however, financial advisers suggest that parents who are looking into this type of loan consider taking out a mortgage as it may be more affordable in the long run.

Another option is presented by Private Education Loans which are usually financed by private lenders such as banks. These loans tend to have higher interest rates but can help cover costs that Federal loans simply can not cover. Private Education Loans are often considered to be a last resort option before thinking about credit cards to help pay for school. Lenders will look at the student's credit score before approving a loan amount along with the time which is why Federal backed loans are more desirable then Private Education Loans.

Student Loan Consolidation is a handy tactic that combines the various loans received into one monthly sum. While the student receives the convenience of paying just one amount this method of repayment may turn out to be far more expensive. When considering consolidating financial aid loans the student will have to pay close attention to the varying interest rates of each loan as the consolidation interest rate can run anywhere between the lowest rates and the highest. Not every student is eligible for consolidation so it will be important for students to seek the advice of the college's financial aid department in order to determine if they can use the Student Loan Consolidation.

While there are many types of loans available to students they will have to be weary of the fact that each loan will have to be repaid at some point in the future. Loans should be used wisely and not thought of as 'free money' of which there is no such thing. Many students will find it necessary to take out at least one loan in their college career but by being cautious and loan savvy these students will be able to receive the lowest interest rates possible and will be able to repay the loans in a timely and efficient manner.

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