Choosing the right college loan(s) will help students finance their education and avoid a bad experience when repayment becomes due. Failure to understand the rules and the options, on the other hand, can lead to unpleasant surprises and serious financial difficulties.
There are two main types of student loans; subsidized and unsubsidized. The important difference between the two is who pays the interest while a student is enrolled in college.
Subsidized loans are available to students who demonstrate, via the information they provide on the Free Financial Aid Form (FAFSA), substantial financial need. There is a finite limit on the amount of subsidized loan money students can borrow. However, the government pays the interest on such loans while students are enrolled in college, thus the term "subsidized".
Unsubsidized loans are available to all students, regardless of financial need, and are available in far larger amounts. But, students, not the federal government, assume responsibility for the interest payments.
Almost always, college students who are eligible to receive unsubsidized loans need the full amount they are allowed to borrow. If they need more than that limit, they can take out unsubsidized loans as well.
Students can apply for the Stafford Loan or the Perkins Loan. Neither has to be repaid while students remain in college.
Parents may also take out PLUS loans for their sons or daughter. PLUS loans offer fairly low interest rates, but require repayment to begin within 30 days.
Student loans must be repaid. Even bankruptcy does cancel repayment obligation. Lenders will almost always work with folks having financial problems if they are making a genuine effort to repay their loans. However, those who attempt to avoid repayment face wage garnishment, the withholding of income tax refunds, and other serious penalties.
Students and their families should not fear student loans. They are a great way to help people get the education they need to have a meaningful career and earn far more than they would with only a high school diploma. But, it pays to shop for and fully understand your options and to avoid borrowing more tahn you really need.
There are two main types of student loans; subsidized and unsubsidized. The important difference between the two is who pays the interest while a student is enrolled in college.
Subsidized loans are available to students who demonstrate, via the information they provide on the Free Financial Aid Form (FAFSA), substantial financial need. There is a finite limit on the amount of subsidized loan money students can borrow. However, the government pays the interest on such loans while students are enrolled in college, thus the term "subsidized".
Unsubsidized loans are available to all students, regardless of financial need, and are available in far larger amounts. But, students, not the federal government, assume responsibility for the interest payments.
Almost always, college students who are eligible to receive unsubsidized loans need the full amount they are allowed to borrow. If they need more than that limit, they can take out unsubsidized loans as well.
Students can apply for the Stafford Loan or the Perkins Loan. Neither has to be repaid while students remain in college.
Parents may also take out PLUS loans for their sons or daughter. PLUS loans offer fairly low interest rates, but require repayment to begin within 30 days.
Student loans must be repaid. Even bankruptcy does cancel repayment obligation. Lenders will almost always work with folks having financial problems if they are making a genuine effort to repay their loans. However, those who attempt to avoid repayment face wage garnishment, the withholding of income tax refunds, and other serious penalties.
Students and their families should not fear student loans. They are a great way to help people get the education they need to have a meaningful career and earn far more than they would with only a high school diploma. But, it pays to shop for and fully understand your options and to avoid borrowing more tahn you really need.
About the Author:
Janet Madden is the Director of Guidance at a large, urban high school. In addition to working with high school students, she advises adults in her school's evening programs on online colleges and accredited online degree programs.
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