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What is a student loan?
A student loan or federally subsidized educational loan is money borrowed from lenders privately (not the government) to pay for college tuition and/or fees. Student loans are not granted directly from the federal government. Private companies issue private student loans as well as banks and credit unions. Most student loans are issued by banks and private lending institutions that participate in the Federal Family Education Loan Program (FFELP). The FFELP was established in 1965 by IV of the Higher Education Act, commonly known as the G.I. Bill, which provided financial assistance to returning military veterans attending college.
How much do students borrow?
In 2011-12, total outstanding student debt in the United States reached $921 billion. That number has risen rapidly since then, reaching over $1 trillion in 2015. In 2017, total outstanding student debt had surpassed credit card balances, surpassing $16,000 per household.
Who takes out the student loans?
Students who take out loans usually have lower incomes than those without student loans; therefore, they tend to qualify for smaller amounts of loans. Students who graduate from four-year colleges with bachelor’s degrees in fields like business and engineering tend to have higher loan balances than students who graduate with associate’s degrees or bachelor’s degrees from less lucrative majors. On average, women earn around 20 percent less than men. Therefore, these women tend to get smaller amounts of loans. Additionally, women tend to be employed in jobs where their wages are relatively low compared to men. Therefore, these workers receive fewer scholarships and grants and are also more likely to need loans to help finance their educations.
Where does the student loan money go?
Lenders disburse funding to borrowers after the borrower completes his or her coursework. After receiving the funds, the borrower pays back the lender with interest on the principal balance each month. Since loans are generally non-dischargeable in bankruptcy, borrowers are responsible for paying off their loans until they reach what’s called “permanent income,” which means making a certain amount of monthly payments regardless of whether the borrower has paid off the loan. Borrowers should plan ahead to avoid having to make additional payments once their loans become due.
When do students have to start repaying their student loans?
If a student opts for deferment, he or she may delay repayment for up to six months while completing school. However, if a student chooses to enter a forbearance period, he or she can halt the accrual of interest for up to nine months. If a student decides not to pursue further education or defaults on one of his or her loans, the defaulted amount becomes immediately due and owing plus any accrued interest. The amount owed increases each month the loan remains unpaid, so it’s important to repay loans promptly.
Student Loans Lookup
A student loan is any type of financing that is provided to individuals who wish to attend school. These loans may be provided by government and private entities. If you are interested in obtaining a student loan, visit www.studentloans.gov or call 1-800-4-FED-AID (1-800-433-3282) for more information.
Federal Direct Loan Program
The federal direct loan program is managed by the U.S. Department of Education’s Direct Loan Program. The primary purpose of the federal direct loan program is to provide financial assistance to students attending postsecondary institutions. Under the federal direct loan program, eligible borrowers receive funds directly after they have received their acceptance letter. Eligible borrowers can obtain these loans through the FAFSA and other programs that help them determine eligibility for financial aid. Borrowers under the age of 18 do not need parental consent to apply for a federal direct loan. However, if the borrower is under the age of 20, he/she must be enrolled full time at an accredited institution and cannot enroll in classes less than half the time. Any student who does not meet these requirements must seek parental consent before applying for the federal direct loan.
Federal Family Educational Loan Program
This program was created to encourage education through flexible borrowing terms. To qualify for a FFELP loan, applicants must be between 16 and 24 years old and have completed high school or its equivalent. Students enrolled full time in an eligible educational institution must work at least 100 hours per semester while enrolled, and maintain satisfactory academic progress.
Perkins Loan Program
Students who attend vocational schools can use the Perkins loan program. Under the Perkins loan program, qualified borrowers can borrow money to pay for tuition, fees, books, supplies, equipment, and room and board. Like the FFELP, the Perkins loan program requires borrowers to complete at least half of their course of study. Unlike the FFELP, borrowers do not have to submit their applications through the Free Application for Federal Student Aid (FAFSA). Rather, they can contact the lender directly to request a loan. Eligibility for the Perkins loan program depends upon the state where the borrower resides. Not all states allow for application for the Perkins loan program. In addition, some states require proof that the borrower intends to pursue a degree at the community college level.
Stafford Loan Program
The Stafford loan program provides low interest rates on federally subsidized student loans. Interest accrues monthly at a fixed rate plus two percent. The maximum amount of credit that can be borrowed is $23,000. Also, borrowers must commit to a four year repayment period. There are certain limitations regarding how much federal student financial aid can be applied towards private student loans. A borrower cannot utilize more than his/her total annual grant award without exceeding the maximum amount of credit allowed. In addition, the borrower does not receive the same amount of financial aid from both the Pell Grant and Stafford loan programs. The Stafford loan program begins to disburse once the student submits the FAFSA. Once the loan is approved, the borrower receives a letter informing him/her of the details of the loan, including the amount, term, and interest rate.
PLUS Loan Program
The PLUS Loan Program provides additional funding for parents whose children have been accepted into baccalaureate degree granting colleges. Parents who participate in the PLUS Loan program can borrow up to $31,000.00 for each child. The PLUS loan program begins to disbursal once the parent completes the FAFSA.
Private Student Loans
Private student loan programs operate independently from federal student loan programs. Many people turn to private student lending programs due to the lack of funds offered by the federal government. Private lenders offer different types of loans, including personal loans, parent loans, consolidation loans, and installment loans. As long as the applicant meets the minimum qualifications, he/she can apply for a private student loan. Before submitting a private student loan application, borrowers should calculate what they expect to spend on college expenses. Then, compare those figures to the interest rate and repayment plan on offer.
Student Loans Lookup
Searching for student loans? Here’s how to find out if you qualify!
What do I need to know about student loan interest rates?
Find out what type of student loans you can get.
Is my credit score bad enough to prevent me from getting student loans? How bad is it?
Get answers to frequently asked questions about student loans.
Learn about different types of student loans, including federal student loans, private student loans, and military veteran loans.
See what options are available to you before you apply for student loans.
Learn about the benefits and drawbacks of various repayment plans.
Understand the importance of using a good loan officer and choosing the right loan program.
Know the differences between federal student loans and private student loans.
Find information about the Direct Loan Program, PLUS Loan Program, and Stafford Student Loan Program.
Discover the details about each loan program.
Read about eligibility requirements for each student loan program.
Find out what happens after you have been approved for student loans.
Student Loans Lookup
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Student Loans Lookup
Student loans – what type of student loan do I need?
There are three types of federal student loans: Direct Subsidized Loans (DSL), Direct Unsubsidized Loans (DUSL) and Direct PLUS Loans. To determine which type of loan you qualify for, you should compare how much money you plan to borrow against your estimated family monthly income. You’ll want to consult with an experienced consumer credit professional about which type of loan best meets your financial goals.
*Direct Subsidized Loans- These loans are offered by the U.S. Department of Education, and require no repayment until six months after graduation or separation from school, whichever comes first. After 6 months, borrowers pay interest only while they’re enrolled at least half time and working toward their degree or certificate; then, they begin repaying the principal.
*Direct Unsubsidized Loans- Unlike subsidized loans, unsubsidized loans don’t have any income restrictions. Borrowers repay these loans with interest based on their expected family contribution (EFC). EFC’s vary depending on your income, assets, and number of dependents.
*Direct PLUS Loans- Similar to private loans, PLUS loans require a parent co-sign the loan. Borrowers may use them for tuition, fees, room and board, books and supplies, and job training. Repayment begins immediately upon enrollment full-time at the school where the borrower took out the loan. Parents also co-sign; however, unlike standard PLUS loans, parents do not have any liability if the student defaults.
Some colleges offer additional student loan options, such as Perkins Loans, Parent PLUS Loans and Veterans Administration Loans. Check with the college or lender about the specific requirements. If you already have private student loans, you might find that you qualify for refinancing through either the Federal Family Educational Loan Program or the Government Sponsored Enterprise Student Loan Refinancing program. Both programs allow you to refinance your existing loans without paying back the current balance first.
To apply for a federal direct loan, visit the National Center for Education Statistics website. There are two steps to applying. First, select the option to search for your state and/or area of residence, then enter the name of the school you graduated from. Based on your answers to several questions, you’ll be directed to the loan program that works best for you.
If you want to know more about federal student loans, check out the U.S. government’s official website.
The amount you’ll spend on education will likely play a role in determining whether you’re eligible for a federal student loan. In addition to figuring out how much you’ll borrow for school, you’ll also want to consider how much you think you’ll actually earn once you graduate. If you expect to make less than $40,000 per year after graduation, you might not be able to take out a loan. On the other hand, if you think you’re going to earn $75,000 over the course of four years, you could reasonably afford to finance your education.
What kind of student loan are you qualified for?
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