Personal Finance and Investing

It might happen that you or any other member of your family is planning to join a college and you don’t have enough money to pay tuition fee and other expenses. Then what do you do? The first solution to your problem is scholarships or grants provided by the government but if you are not enough poor and intelligent to grab a federal grant, then the only solution is student loans.

But most of us don’t know how to choose a better option of college loans.

Here are some tips to follow before applying for college loans:

Make a list of colleges that interest you (Stanford, Johns Hopkins, Harward or others of your choice.)

Also make a list of college, which you are likely to get into.

After making both the lists decide how much money you would like to borrow as a student loan, which can be obtained by adding the given data:

Fees, Tuition, Campus expenses, if you wish to live in hostel provided by college, Food, transportation, lab fees and other relevant expenses.

Now it’s turn to search for a better lender, who will finance you. Most of the colleges or universities have their own list of lenders who can provide you suitable college loan. If you are unable to find any suitable lender in their list then you are recommended to visit financial institutions located in your area. Almost all the lenders have their websites so, check their norms and terms.

Some lenders offer attractive offers like interest reduction, discounts and rebate programs. So spend a little time to search lender with beneficial offers.

The most popular type of student loans are:

1. Stafford Loans

Stafford loans are suitable for both undergraduates and graduates. Both unsubsidized as well as subsidized options are available.

2. Plus Loans

Suitable for parents of undergraduates.

3. Private college loans or student loans: Private student loan or private college loan is meant for additional funds.

Before applying for a student loan or private student loan you should try your best to get any grant or scholarship just to minimize the burden of loan.

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College financial aid for students attending college and graduate school can come from several sources, including scholarship, grants, federal loans and private loans. It can become a complicated labyrinth that isn’t always easy to navigate.

Most college planners urge students to tap out on federal funding before turning to other sources, because financial loans tend to be less expensive in the long run. Unfortunately, because college tuition is so high today—and expected to continue to increase—federal loans many times only pay for a portion of college costs.

And while scholarship and grant money are available, the number of students who attend college on a full scholarship are few and far between. The smart thing to do when planning to pay for college if you don’t have a huge college fund at your disposal (most people don’t) is to apply for federal loans. Here’s why: Federal student loans often have an interest rate that is far lower than private financial institutions, and also offer better and longer payment terms.

Usually, students don’t have to start repaying the loan until after graduation, and sometimes can even defer payment of an original loan if the student goes back to school for additional training.

These federal loans don’t pay for everything. The most a four-year student can borrow is $10,500 per year, which for some colleges is just a bite out of a much bigger pie. For graduate programs, the loans can go up to $20,500. What any particular student receives is dependent on several factors, including the college of choice and in which year the student is.

Students can choose from three federal loan programs:

—Stafford loans are available to students in two forms: for low-income students, who don’t have to provide credit references, and for other students, who do.

—Plus loans are low-interest loans taken out by parents to help pay the difference between real college costs and the amount of the student loan. Still, even with this loan tuition costs often exceed what the loans cover.

—Consolidation loans allow parents and students to consolidate multiple loans into a single loan with one monthly payment.

When students apply for a federal student loan, they fill out a Free Application for Federal Student Aid (FAFSA), which automatically includes their information for other programs, including scholarships, grants, or work programs provided by the federal and local governments.

Because financial loans are covering less and less a percentage of college tuition, private financial loans are becoming more popular. Unfortunately, as with any private loan, only those with the best credit scores will receive the best rates. Private loans can be expensive and most college planners urge parents to exhaust other financing methods first.

The best private loans have rates competitive with the federal low-interest rates, about LIBOR +/- 2.0. Watch for lenders that offer a low rate while the student is in school, then raise the rate when payments are due.

As with anything, shop around, do your research, and perhaps paying for college won’t be such a nightmare.

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