Student Loan Debt ... 5 Strategies That Work
1. Student Loan "Grace Period" 6 Months After Graduation. Cleaning up after graduation parties and removing end-of-senior-year mind cobwebs reveals that each new graduate has a Federally mandated 6 month grace period in order to pay down the total Student Loan obligation...or to refinance the debt via a 1-time Student Loan consolidation.
2. Consolidating Student Loans. Student Loan consolidation involves some simple, but important rules. Only graduates can consolidate. Current students are barred from consolidating Student Loans.
· Student Loan Consolidation Rule #1. Identify 100% of your outstanding college Student Loans. Why 100%? The Government only permits a 1-time Student Loan consolidation. Forget to include a past borrowing and you get nailed. The National Student Loan Data System manages a database where your loan history should be recorded.
· Student Loan Consolidation Rule #2. Time matters. Consolidating Student Loans must result in your application being received on or before 30 June if you want to avoid potential interest rate increases.
· Student Loan Consolidation Rule #3. Freshly graduated students are provided a 6-month grace period following graduation. Identify, say, your total Stafford Student Loan portfolio and then consolidate Student Loans in one fell swoop...and you'll receive an instant 0.6% interest rate reduction on the balance. This discount could become serious money savings over time.
· Doing The Math. Student Loan consolidation is based on math...taking weighted averages of all past borrowings, then rounding up 1/8th percent to result in your consolidated Student Loan interest rate. All of this consolidation occurs prior to 30 June in the year that you apply.
3. Where Are The Lowest Cost Student Loans? Thank you Big Government...the best Student Loans rates you'll get are Federally issued Stafford, Perkins or PLUS Student Loans. Government-backed, these Stafford and related Student Loan borrowing plans offer lower interest rates than private market lenders can offer, along with more flexible loan repayment terms. Why? Unlike a personal loan, the Federal Student Loan transfers a portion of the borrower's risk to the Government...resulting in lower-cost-of-funds.
4. Are Personal Background Credit Checks Always Required? No. Not every student, or her parents, necessarily has the cash or good credit history to satisfy Student Loan lenders. The good news is that "No child left behind" and the American commitment towards higher education...enters into a marriage of convenience with profit-seeking lenders...to create a secondary market in bad credit Student Loans. Risk adjusted, bad credit Student Loans carry marginally higher interest expenses, are generally more inflexible regarding payment lapses, yet offer longer repayment terms which lowers the monthly out-of-pocket expense. Meanwhile Federal Stafford or Perkins loans are 'credit neutral' and do not require a credit background check in order for a student and his family to qualify.
5. Federal Student Loans Versus Private Loan Sources - Pros & Cons. Historically, Federal PLUS, Perkins or Stafford Student Loans offered the most flexibility and, due to government backing, the lowest interest and repayment rates. Until 2006 Federal loans could be "variable"... where the next year's interest rate is based on the Treasury market in a 90 plus trading period ending 1 June. The new "variable rate" becomes effective 1 July each year for all past variable rate loans. For example, 2006 Federal Student Loan rates for variable carried a 6.54% interest cost.
· Congress Passes New "Fixed" Rate Student Loan. Because of new legislation passed by Congress, all "new" Federal Stafford loans from 1 July, 2006 onwards are now "fixed" at 6.8%. Fine Print - What's The True Discount Student Loan? College Student Loan "deals" require a mix of focus and document review in order to decipher the true nature of "discounts". As Albert Einstein opined "God dwells amongst the details" and so it applies to Student Loan documents.
· Practical Example. For example, "discounts for on-time payments" may look attractive...but what if the interest rate deduction "reward" only occurs retroactively after 4 to 5 years? One missed payment anywhere in the time-stream and presto...the discount vanishes. Or, certain discounts only apply to portions of the loan term...in other words, you'll pay "full rate" for substantially all of the loan life, and the discount only applies to a portion of the loan life. Result? An advertised 1.25% "discount" may actually be worth only .25% when you move through the discount analysis. A useful site for families
Private Student Loans Or Alternative Education Loans Can Fill The Gap To Pay For College
Private loans, also known as alternative or private Student Loans, are providing a growing number of college students with much-needed education funds to cover college-related expenses that may not be covered by award caps, Federal Student Loans, scholarships and grants. As long as proof of enrollment is provided to your lender, and you qualify, you could use a private loan to pay for almost any of your educational expenses. Some private loan lenders even let you borrow to pay for previous school fees.
Got bad credit, no credit? That's not a huge obstacle - as you will find out, using a qualified co-signer when applying for a private loan can mean a greater chance to get approved for your loan, a lower interest rate and a higher loan award!
Private Student Loans - Pay for just about all your college-related expenses, not just tuition
It's important to take advantage of Federal Student Loans first, because they usually offer the lowest Student Loan interest rates.
To apply for Federal Student Loans, just complete a Free Application for Federal Student Aid (FAFSA Form). However, Federal Student Loans may not be enough to pay for your tuition, not to mention other costs of attending college.
What's especially valuable about private loans is that you may use them to pay for practically all your college-related expenses, including:
- Tuition and fees
- Books and supplies
- Computer/laptop
- Room and board
- Transportation
- Living expenses
Private Student Loans help you get you the education funding money you need
Unlike Federal Student Loans, private loans distribution amounts are not solely based on predetermined need - you can apply to borrow as much or as little as you feel you need to cover any of your educational expenses. Just be sure not to over borrow to keep your Student Loan debt at a manageable level.
Depending on the type of private loan you are seeking, many private loan lenders offer qualified borrowers private Student Loans as little as $500 or as much as $40,000 or more per year to cover your cost of attendance, less other aid you may receive (such as grants, scholarships or Federal Student Loans).
Applying for a private Student Loan could get you the money you need EASIER and FASTER
While approval for Federal Student Loans requires time and the need for financial aid forms, you could be pre-approved for a private loan within minutes of applying and your funds could be sent to you within just days of final approval! Many times the private loan application process is very simple and can even be done either over the phone or online.
Not a full-time student? You can still apply for a private Student Loan!
Even if you're taking just a couple courses, you could still be eligible to receive a private Student Loan to cover the expenses. Most private loan lenders will give you a loan whether you're attending college full-time, part-time or half-time.
Unlike Federal Student Loan awards that are based on an individual's financial need and EFC (Estimated Family Contribution) amount, private loans allow you to apply for as much money as you think you'll need to cover your educational expenses. Even International students with an eligible U.S. co-signer are eligible for private loans. Most private loan lenders have just a few criteria for an individual to be eligible to apply for a private loan, such as:
- Must be creditworthy applicant or have a creditworthy co-borrower;
- Must be a U.S. citizen, U.S. permanent resident, or international student with qualified U.S. citizen or U.S. Permanent Resident co-signer;
- Must be within the age of majority by your state (typically 18 years of age);
- Other qualifications, such as employment status and history, enrollment verification and attendance at a qualified school, and income verification are often required by most private loan lenders.
A plethora of private loan types available
Many private loan lenders have private loan products tailored specifically for your student status, including:
- Undergraduate students;
- Graduate students;
- Medical students;
- Law students (Law School and Bar Study Loans) and other professional degree seekers;
- Continuing education students;
- Kindergarten through high school, especially for private schools (also known as K-12 private loans)
Getting a private Student Loan or alternative Student Loan is based on your own creditworthiness
Because private loans are made by private institutions rather than the government, your ability to get a loan is based on your credit history, ability to repay a loan, employment history, debt-to-income ratio and other criteria. As a student, you may not have had the opportunity to build up a solid credit history. That's why having a co-signer can be in your best interest (no pun intended!).
Got bad credit or no credit? No worries, having a co-signer can help you get a private loan!
Since the loan amount and your interest rate will be based on several criteria of merit, often a credit-worthy co-signer could not only increase your chance of getting approved but also help you obtain the loan amount you've requested along with a lower interest rate. In addition, using a co-signer can help improve your own creditworthiness.
Unless you're employed full-time, have excellent credit and a decent annual income, it is often recommended to include a creditworthy co-signer when you apply for your private loans to increase the chance of qualifying for one. Your co-signer can be a parent, relative or other creditworthy adult.
Many private Student Loan or alternative loan lenders give you various repayment terms and options for greater flexibility and manageability of your private loan balance
Most private loan lenders will defer your payments while you're in college (length of time determined by the type of program you studied) and give you a grace period of 6 months before you are required to start repayment to give you time to get financially situated after college. To make things even more convenient, many private loan lenders will give you a choice of repayment terms, including:
- Immediate payment of principle and interest; or,
- Immediate repayment of interest only; or,
- In-school deferred repayment of principle and interest until leaving college.
Government and Federal Student Loan Programs offer Student Loans Without a Cosigner
If you are considering entering college in the near future you should be aware of the many different types of government and federal Student Loans. While many colleges do offer free Student Loan scholarships and there are various types of need-based financial aid and grants available; loans still make up the major portion of funding for the cost of education for most college students. Private Student Loans are also available; however the advantages of federal Student Loans usually far outweigh any benefits of private Student Loans; if you qualify to receive them.
Private college loans are credit based and may involve a co-signer from the students parent. You must qualify to receive a private Student Loan even though the loan program features are quite attractive. The National Student Loan Center or the NSLC offers many private low cost low rate college Student Loan programs. The NSLC also offers private as well as government Student Loans. An especially attractive Student Loan program offered by the NSLC, is the NSLC PLUS loan program; which gives parents of students the option to borrow up to 100% of their child's cost of education. This is nice because the cost of higher education institutions is blasting through the roof every year! Armed with this type of higher education financing, a college student can fund everthing from room and board to books and just have to concentrate on studies.
Government and federal Student Loans allow college loans without a cosigner. They are non credit based Student Loans. Credit is not even looked at under federal college loan programs for students. Their will always be a Student Loan lien on the students credit until the college loan is finally paid.
Perkins Loan
One of the most common government and federal Student Loans is the Perkins loan. It comes with a low interest rate of only 5% and is awarded to both undergraduate and graduate students. There are no origination fees charged for this loan and it is paid back to the school because loan funds are issued directly from the school to the student from monies provided by the government. Take a look at the following facts regarding the Perkins Loan:
- Need based loan; only those students with exception financial need will qualify
- Able to borrow up to $4,000 for each year of undergraduate study and $6,000 for each year of graduate study.
- Loan limits are $20,000 for two years of undergraduate study and $40,000 for graduate school.
FFELP (Federal Family Education Loan Program)
This is also another common loan and features both subsidized and unsubsidized Student Loans. The difference between the two is that the government will pay for the interest of the Student Loan while the student is in school and during the grace period of a subsidized Student Loan while the student is responsible for the interest in an unsubsidized Student Loan. Additionally, students must display a financial need to qualify for a subsidized Student Loan while the unsubsidized Student Loan is non need based.
Federal Parent Loan for Undergraduate Students (PLUS)
This type of Student Loan is available to parents and guardians of dependent undergraduate students. Borrowers do not need to demonstrate financial need and may borrow up to the cost of attendance; minus any amount of financial aid that may be received. Loan funds are first applied to tuition and fees. This type of government and federal Student Loan has a variable interest rate.
Obtaining a college loan without a cosigner is made possible with government sponsored loan programs. They are not credit based Student Loan programs. Private Student Loans are credit based and you must qualify based on your credit. Sometimes a cosigner is neccessary in these types of private loans. Higher education Student Loans can be obtained through these federal loan programs and also higher education scholarships can also be awarded if you take the time to fill out the proper forms. A federal grant for students is another free scholarship made available by the governement for college students. There are many different grants which anyone can receive if you fill out the student aid forms. This is the first step to take because colleges and universities are allocated certain grant amounts, once used up for that school year are gone. |
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