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Going to college is something that every parent wants for their child. In today’s world a college education is far more important then ever before. A person with a college degree has far more earning potential than a person without one. However, a college education is not free. College is actually quite expensive and usually requires a combination of efforts to completely pay for it.

Paying for college is confusing and many time students end up lost in the whole process. The smart student, though, will work with their financial aid office to ensure that they get all the free funding possible. When it comes time to look to alternative funding the student will be prepared to continue working with their financial aid office or on their own to find the funding they need.

While many students qualify for financial aid, such as grants and scholarships, these things do not usually cover the total cost of a college education. Most students have to find alternative funding and that is usually in the form of student loans.

Student loans are often complex. There are so many variables to them. However, student loans are seen by lenders as a good investment which means they are usually easier for a person to get then other types of loans.

Despite the fact that these are unsecured loans, lenders know that the money is going towards something worthwhile and that is what drives them to help students get the loan they need.

There are many sides to student loans that you should understand before ever going in search of one. You need to read through the following chapter to get a good idea about student loans and your options.

Two Sources For Student Loans

There are two basic sources for student loans. Every student loan is going to be either a government loan or a private loan. There are differences in each that need to be understood so you can choose which is best for you.

GOVERNMENT

Government loans involve filling out the Free Application for Federal Student Aid (FASFA). This form calculates the student’s ability to pay for college and determines the amount of tuition the student should be responsible for. It basically gives an idea of the financial needs of the student. Financial need is a large consideration for a government student loan.

There are a few different types of government student loans:

– Stafford loan: The Stafford loan is available to students and solely based on need.

– Perkins loan: This loan is the same as a Stafford loan.

– Parent PLUS loan: The Parent PLUS loan is a loan given to parents of college students. The parent is the responsible party for the payback of the loan. It is usually much larger then the other types of government loans.

– Graduate PLUS loan: The Graduate PLUS loan is like the Parent PLUS loan, but is for graduate students only and the responsibility of the student.

There is something else about government loans that can be confusing. You may often hear the terms subsidized and unsubsidized. With a subsidized loan the government pays the interest on the loan while the student is attending school. With an unsubsidized loan the student is responsible for all interest.

Additionally, many of these loans have deferment options which are where they do not have to be paid back until after the student graduates from college.

PRIVATE

Private student loans are not managed by the government. They are also not given based upon need. Private loans usually are not limited in the amount you can get, like government loans, which always have a maximum loan amount. Many private loans also offer deferred payment options.

Both types of student loans are given through private lenders; however, government student loans must follow the provisions of government set guidelines.

Where To Go For Student Loans

As mentioned, student loans are received through private lenders. There are a few different popular lenders who specialize in student loans. One of the best methods for getting student loans is to work with your school’s financial aid office.

The financial aid office is staffed with trained professionals who know how to get you approved for loans. They know the best lenders for you particular situation and they can usually handle every aspect of the loan. All you will need to do is sign the loan documents.

Alternatives To Consider First

Student loans are a major debt to incur. That is why students are encouraged to try every other option first. Students should consider:

  • Grants
  • Scholarships
  • Family contributions

 

Student Loan Risks

Student loans are obtained when you need them. The money usually goes straight to the school so that the lender knows it is being used solely for the purpose of funding your education. While getting a student loan may be something you can do, even with bad credit, it is still not something that you should not consider to be a serious investment.

Government and private student loans that are not paid will not go away. The lender will have various options to collect the money owed to them if you default on the loan. It is your responsibility to make sure that you obey all the terms and conditions of the loan. You should always read through the loan papers carefully so that you understand everything that is required of you to stay within the agreement.

You should also never let payments slide or try to avoid calls from your lender regarding late payments. Lenders are usually quite lenient with student loans. They will usually work very hard to help you get back on track.

They have several methods they can help you, from reducing payments to putting a temporary hold on payments. Lenders are there to help you and should not be looked at as an enemy. After all, they did lend you money to help you with your education.

In general, students who default on student loans often drop out of school early. Once a student is no longer in school they assume there is not much point in paying for it. This is a bad mistake. Lenders can do everything from garnish wages to file a collection suit in court when it comes to trying to collect on a loan.

Student loans may be something you never deal with, but for most people a student loan is going to be one of the most important financial transactions they make in their lifetime. Understanding how they work is essential to ensuring that the student loan process is smooth and successful.

LOAN GUIDE – Everything You Always Wanted To Know About Loans

Introduction
Part 1 – Getting An Auto Loan
Part 2 – Home Loans
Part 3 – Commercial Loans
Part 4 – Personal Loans
Part 5 – Student Loans
Part 6 – Securing A Loan
Part 7 – Loan Application

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