Getting a university and college education is one of the most important part of a person’s life and it has now become one of the most expensive one as well. The college tuition of private colleges and universities can reach $50,000 a year. Also, the increase in college tuition averages 14 percent annually. Even though higher education tuition at public universities is lower than their private counterparts, their costs have risen as well.
Not surprisingly, students and their families are accessing school loans at higher frequencies to pay for college. In 2007, more than $78 billion in private and federally guaranteed college loans were accessed. Millions of college students depend on school loans to pay for higher education, financial aid is important in maintaining their continuous schooling.
Basically, there are three types of student loans that you should be aware of: direct federal loans, federal loans offered by private lenders which are guaranteed by the government; and private student loans provided by private lenders with no government guarantee.
Students should first try to get federal student loans because the interest rates of these school loans are capped at a fixed rate by federal law. University financial aid officials should first steer you towards federal loans.
By far the most common federal loan is the Stafford loan which is available to all college bound students irrespective of financial aid need. Stafford loans can be accessed directly from the government or private loan lenders. Meanwhile, Perkins loans are bestowed to students in greatest financial need.
Certain students are eligible for federal Pell grants based on income, students belonging to low-income families. Also, parents of students can get federal loans, known as Parental Loans for Undergraduate Students or PLUS loans. You can get more details about federal student loans on the Education Department’s website.
Currently, interest rates on Stafford loans are 6.8 percent, PLUS loans are 7.9 percent, Perkins loans are 5 percent, and direct loan programs are 8.5 percent.
However, the federal government does impose limits on the amount lent to college students. For example, a freshman can take out $3,500 in Stafford loans, $4,500 for a sophomore, and $5,500 for the remaining years for a maximum loan amount of $23,000. .
Like federal loans, private loans provide students access to funds to complete their university education.
Private school loans come in handy for students looking for additional funds to complete their education. Also, private loans are accessible even though federal grants or loan subsidies might not be available. These loans can supplement your existing federal loans. Unfortunately, in absence of tangible government help and rising education costs, college students are ensured dependence on student loans while pursuing higher education.