Best College Loans For Students 2019

Federal Direct Stafford Loan

The federal direct loan program (also known as a subsidized student loan) is sponsored by the U.S. Department of Education. These loans are offered to undergraduate students who have financial need.

Federal Perkins Loan

The federal direct lending program (also known as unsubsidized student loans) is sponsored by the US Department of Education. Perkins loans provide funds to graduate students who demonstrate financial need.

Private Student Loans

Private education lenders offer many options to borrowers and their parents. However, they may not be eligible for all types of federal aid programs and some private lenders charge higher interest rates than do government-sponsored student lending institutions.

Best College Loans For Students 2019

Federal Family Education Loan (FFEL) Program

This loan program gives students who need financial aid money access to federal student loans. These loans can help pay for college expenses not covered by scholarships or grants. The government provides these funds to both public and private schools. Private lenders offer additional programs, including direct lending, that may have lower interest rates than those offered by the U.S. Department of Education.

Direct Subsidized Stafford Loan

The subsidized Stafford loan is funded by the U.S Department of Education and offers fixed-rate financing. Eligible borrowers receive a monthly payment while enrolled at least half time. After graduating, payments remain federally guaranteed and don’t accrue any additional interest charges for seven years. Most private lenders use the same terms for their subsidized loans.

Federal Perkins Loan/PLUS Loan

These two types of loans offer low interest rates. Eligibility requirements vary based on whether or not the borrower plans to attend school full-time. In general, the parent PLUS loan requires a co-signer, while the Parent PLUS Lending program does not. The federal government pays the loan if parents default, plus it adds interest charges.

Federal Unsubsidized Stafford Loan

Unsubsidized Stafford loans do not require a co-signer. Borrowers must make payments directly from their own accounts. However, they are charged higher interest rates and aren’t protected by the federal government.

Federal Direct Consolidation Loan

Direct consolidation helps students manage their debt. Instead of paying several different lenders, borrowing money from a single lender reduces monthly costs. The lender consolidates separate debts into a single loan with a variable rate that often drops after graduation. If you consolidate your loans before you graduate, you could save money each month.

Best College Loans For Students 2019

Student Loan Interest Rate

Student loan interest rates vary depending on the type of student loans you choose and what they are for. Generally speaking, federal student loans carry lower interest rates than private student loans. Federal student loans are offered at fixed interest rates, while private student loans have variable interest rates. Most private student loans allow students to opt-out of paying interest after a certain amount of time.

Student Loan Type

The two main types of student loans are unsubsidized and subsidized. Unsubsidized loans do not provide any government assistance in terms of interest rate reduction. However, these loans offer the lowest monthly payments. Subsidized loans are funded with money provided by the U.S. Department of Education. These loans are offered to eligible students who meet specific requirements. A student would need to complete his/her undergraduate degree before receiving a subsidized loan.

Repayment Term

Repayment terms determine how long your loan will be paid off and how much you will pay back each month. While repayment terms range from 10 years to 30 years, most lenders want borrowers to graduate with their loans fully repaid on time.

Annual Percentage Rate (APR)

The annual percentage rate (APR) is the total cost of borrowing divided by the number of months to repay the loan over a period of 12 months. This APR is determined by dividing the loan’s original principal by the number of days between now and when the borrower plans to pay the loan back.

Loan Fees

Loan fees generally cover costs associated with managing the loan. There may be different types of loan fees including origination fee, processing fee, discount points, and closing costs. Origination fees are charged when applying for the loan. Processing fees cover work done by loan companies after the application has been received. Discount points are fees that are applied to the loan to compensate lenders for providing financing to borrowers. Closing costs are associated with preparing legal documents and completing financial transactions.

Default Rates

Default rates refer to the percentage of student loans that become delinquent or go into default within a specified time frame. Default rates can range from 1% to 5%.

Debt Consolidation Options

Debt consolidation options include consolidating all of your debts into a single payment plan, spreading out your debt repayment over several years, and refinancing your existing debt.

Best College Loans For Students 2019

Federal Stafford Loans and Perkins Loans

These loans are offered to students at all levels. You can use these if you’re enrolled in school full-time. These loans have low interest rates and monthly payments. However, they do require borrowers to pay fees each semester. There’s a grace period before repayment starts while you’re still in college. After graduation, the loans become due and payable immediately. If you default on any student loan, you’ll face stiff penalties and interest charges.

Direct Subsidized Loans

This type of loan is only available to undergraduates. It doesn’t require repayment until after graduation. While this type of loan won’t accrue interest during the deferment period, you’ll have to repay some of the principal amount once you graduate. You don’t need a job to qualify.

Direct Unsubsidized Loans

If you’re not currently working and aren’t enrolled in school, then a direct unsubsidized loan may be right for you. This type of loan carries no restrictions on how long you can take to make payments. As long as you work, this type of loan will be repaid. Direct subsidized loans are only applicable to undergraduate students.

Parent PLUS Loans

Parents who borrow money to help their children attend college should know about this option. You can get this loan even if you’re not a parent yourself. But, you’ll have to commit to repaying the loan throughout your child’s entire education. If you lose your job or stop paying off the loan, the total amount could become unaffordable. Your student can apply for this loan regardless of whether he or she has been accepted to school yet.

Consolidation Loan

Consolidating all your loans into just one can save you money. Borrowers who consolidate don’t own several private student loans; instead, they receive one government-backed loan. Your consolidation loan will have lower interest rates than your original loans did, saving you money over time. But, remember that consolidating multiple loans also means you’ll have fewer options when it comes to making payments. You might have to move your repayment dates forward. You’ll also likely have less flexibility when it comes to taking out new loans. Don’t consolidate unless you really want to manage one big payment.

Private Student Loan Programs

There are many companies out there that offer private student loan programs. Often times, these types of loans are better suited for those who already have an established income. But, if you do manage to land a good job, you can qualify for a private student loan program. These types of loans tend to carry higher interest rates than federal ones, meaning you’ll end up having to pay back more money in the long run.

Refinancing

You may be able to refinance your current student loans into something cheaper. Contact your lender and ask them if they’ll allow you to refinance your loans. Many lenders offer refinancing as a standard practice.

Best College Loans For Students 2019

Federal Stafford Loan (Direct Subsidized)

This is the best loan for students who want a low interest rate and have bad credit. This loan allows you to borrow money directly from the government at an annual interest rate of 6.31%, which is lower than most private student loans. You will not need to pay back any money until after graduation, and if you default on payments you may be able to get out of repaying the loan entirely. Direct subsidized loans do require some minimum financial aid eligibility requirements, including having either no outstanding federal education debt or being employed half time while enrolled.

Federal PLUS Loan

This loan is similar to direct subsidized loans, except that it does not offer as low a rate. The rates for these types of loans start around 9% depending on your credit score. However, lenders consider income, assets, and expenses when determining how much you can actually afford. If you are accepted into a graduate program that includes tuition waivers and/or stipends, you should be eligible for additional scholarships.

Private Student Loan

Private student loans are only offered to those who meet certain financial criteria. These loans have higher interest rates compared to federal student loans, beginning at 8.25%. There are many different types of private student loans, ranging from subprime to super prime. Because of their high cost, private loans are usually only considered for larger amounts. Most private loans require full-time employment or a substantial amount of financial aid to be eligible.

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