College Student Loans
Friday, December 28th, 2007College Student Loans
College student loans are one of several ways for undergraduates to pay for higher education. There are several forms of loans with the most popular being loans through the U.S. Department of Education. Private lenders also supply college student loans.
Financial aid administrators recommend students begin the search for college student loans by filling out the Free Application for Federal Student Aid (FAFSA). The FAFSA collects detailed information on the student and parents (when filing as a dependent). Based on the information from the FAFSA, a Student Aid Report is generated and submitted to the school(s) of the student’s choice. The school’s financial aid administrator then determines what types of aid the student qualifies for. In some cases, depending mainly on financial need, a student may be awarded federal grants, state grants, grants awarded through the school itself, and federal college student loans.
The federal loans vary in terms and are again based on need. If a student demonstrates financial need he or she may be awarded a subsidized Direct Loan. Subsidized loans are backed by the Department of Education, which pays the interest charges on the loan while the student is in school and during any grace periods and approved deferments. There is also the case of unsubsidized loans in which the student is responsible for interest charges for the entire life of the loan.
Other student loans available to students come from the private loan sector and are called private student loans. These loans are backed by private lenders and are granted based on the borrower’s credit history – not financial need. Private lenders do not offer subsidized loans. Also, interest on a college loan through private lenders ranges from the prime rate to 15 percent or more. Federal loans sometimes offer rates below the prime rate because they are guaranteed by the government.
