Stafford student loans
A few decades ago, getting a loan was a Herculean task. But today, loans come in our way. Loans are readily available for buying land, car and personal computers, to name a few. Lately, Stafford student loan are available to buy anything of our choice.
Student loan:
The price of higher education goes on inflating year after year. Though todays parents save a lot towards their childrens education, there is always a gap to be filled up, due to this inflation. No parent wishes to block or break a students education, simply for lack of funds. Hence more and more parents and students go in for student loans. Although student loan is very popular in the US and UK, it is still at an infancy level in India. Nowadays, a degree from a prestigious institution costs much and hence one needs financial assistance to acquire one. Rare is a student who graduates from college without a heavy debt load.
Grants and scholarships are the most preferred, since it is free money. Here, financial aid officers nationwide come to our rescue and help us to utilize this free money effectively and efficiently. Many leading lending companies like Sallie Mae invest millions of dollars for this cause. It is not possible that every one can get this grant or scholarship, in this competitive world. Every one is intelligent and hence chances are that one misses the grant or scholarship in a very meager margin.
The next best choice is private loan and federal loan. Basically, there are two types of federal loans subsidized loan and unsubsidized loan. In the case of subsidized loan, the government takes the responsibility, and interest rates arent charged until the student finishes graduation. But in the case of unsubsidized loan, interests are charged throughout the tenure of the loan. These loans are for students who do not demonstrate financial need. Hence, needless to say, subsidized loans are the most sought Stafford student loan. However, only the needy people get the subsidized loan.
Private college lending is fueled by the increase in the fees, infrastructure, laboratory facilities etc. However, a student can increase their federal student loan, called the Stafford loan, before going for the private loan.
Parents, too have access for federal loans. They are the PLUS loans. It is slowly picking up popularity among parents.
Difference Between Federal and Private loan:
Both the loans differ from each other in many features. Prominent among them are interest rates, fees, eligibility requirements and repayment. Interest rate The federal loan interest rate is fixed at 6.8% for Stafford loan and it is
7.9% to 8.5%, in the case of PLUS loan. The private educational loan may start with a much lower interest rate, but a remarkable increase is inevitable, depending on fluctuation rates. Fees Federal loan fees is calculated to be about 3% to 4% of the total loan amount, whereas the private loan fees may be as high as 11% Eligibility requirements Federal loan does not depend on the credit history of the student for lending. However, parents eligibility is taken into account, but that does not affect the interest rate or fees in any way. Whereas with private loans, eligibility depends on ones credit history and the fees and interest rate also varies accordingly. Repayment Federal loan offers some flexibility in repayment, in accordance with the income earned. There is no such flexibility in a private loan.
Also in a federal loan, the repayment can be defered for a maximum of three years, owing to economic hardship or unemployment. Such a facility is not available in private loans. Above all, federal loan may be discharged under certain tragic situations like bankruptcy, disability or death. This is not so, with private loans.
Stafford student loan: Regular students enrolled in an eligible program, atleast for half-time is eligible for Stafford student loan. The first and foremost step is to file a FAFSA, which is free. The US Senate House has put a step forward in reducing the debt on the student by reducing the interest rates. The interest rates are cut into half from 6.8% to 3.4% -incrementally over five years. This applies to the student whose family yearly income is between $26000 and $68000. It is estimated that around 5.5 million students will be benefited by this move. However, this move didnt get the due reward, since the House didnt increment the Pell grants, which is the free finance provided to the students, that is, it need not be repaid. Another major drawback is, finally when the interest rate comes down to 3.4%, it will again shoot up to 6.8%, if the plan is not renewed in 2012. Sallie Mae and many other outstanding lenders of this industry have worked for decades and are providing innovative products, high quality service and competitive prices.
They offer zero-fee Stafford student loan, thus saving the precious dollars of the students, while they are studying. These fees are paid to the federal government, on behalf of the student, by these lenders. Financial aid officers of these companies ensure that the student and the family borrow only what they need and deliver the most effective financial aid packages. Some lenders levy origination fee on Stafford federal loan. Instead of paying this on behalf of the student, these lenders tend to tout-back. The result is, if the student consolidates or makes even one late payment, they lose all the benefits of the zero-fee Stafford loan. Loan payback: College students often delay paying back the loan. They forget about the loan itself, until they receive their first pay-cheque. Hence, student advocates are of the opinion that the loan repayment should be tied to the students first salary.
They have also stated that not more than 8% of the students take-home pay should be earmarked for payback. Every student should not forget the path they traveled and should be earnest in their repayment of loans. Only then, loans can be provided to the forth-coming generations. Todays students are tomorrows workforces and by loan repayment, we indirectly help in improving our countrys infrastructure. Students are the backbone of a country and hence they should prove to be worthy of it.
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