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Monday, May 23, 2011

College Parents Guide to the 8 Types of Student Loans

College Parents Guide to the 8 Types of Student Loans

Last year at this time, we were frantically looking for information on the different types of student loans.  Unfortunately we could find bits and pieces on various websites, but nothing as complete as we needed.  This gave me the motivation to provide for others what we couldn’t find. You will, after reading this article know exactly what the 8 different types of student loans are and if you should pursue them or not.  Now, let’s start reading.

Student Loans: 8 Types

* Federal Stafford Loan (2 types: subsidized-unsubsidized)
* PLUS Federal Loans (Parent Loan for Undergraduate Students)
* Perkins Loans
* Bank Loans
* State Loans
* Additional Unsubsidized Stafford Loan
* Loans from other sources
* College Board Extra Credit Loan

You can start looking for the various types of student loans that fit your needs but you can’t apply for them until you have successfully submitted your application to FAFSA.  You will receive a Student Aid Report and that is what your lenders will base your loan on. Once FAFSA sends you your Student Aid Report (SAR) then you can start looking for the best student loans available for you and your child..

1.  Subsidized Stafford Loans - no doubt the most popular loan available today. The reason is simple- both undergraduate and graduate students have access to these government loans and they guarantee them.

***Student Loans Secrets***
These rates are for subsidized loans to undergraduate students.

  * 6.0% for the 2008-09 school year
  * 5.6% for the 2009-10 school year
  * 4.5% for the 2010-11 school year
  * 3.4% for the 2011-12 school year
  * returns back to 6.8% for the 2012-13 school year.

My wife recieved this loan, but they didn’t give her enough so she had to find another loan from Discovery Student Loans.  Our son was not granted permission for a subsizided loan and he had to get the unsubsidized loan.

One other point of interest that you need to know is that each year you will need to re-apply to FAFSA for your loans.  January 1st is the day you can submit your applications and it is first come first served.

2.  Stafford Usubsidized Federal Loan – if you do not receive a subsidized loan you’ll almost always receive one of these.  They can be long term loans but you will need to make monthly interest payements.  With our son we set up a automatic withdrawl from our checking account for 10 dollars that covers the interest and a small amount of the principal.

***Student Loans Secrets***

Students who are working while attending college, negotiate with your lender to make monthly payments and round up to the nearest tens. If your interest is 8 dollars a month pay 10 dollars which shouldn’t be that hard.  Any time you can pay on the principal the better.

3.  PLUS Federal Loans – this loan is for parents who want to pay for their childs college education and receive some tax benefits. Even if you have poor credit this might be the loan for you.  Other benefits of this loan include low interest rates and the ability to receive the entire amount of the college education.

***Student Loans Secrets***
You can negiotate repayment of your PLUS loan. Chose from graduation date repayments or start 60-90 days after the loan money.

4.  Perkins Loans - students will find out quickly that these loans are limited, but if you are having financial difficulties this is the type of loan you should look for.  You can expect competitive interest rates that are low.

***Student Loans Secrets***

Federal Perkins Loans are reported to your credit bureau.  Do it right and you will have an excellent credit rating.  Default or late on payments will spell trouble.  Be very careful.

5.  Bank Loans – search hard because you might be able to find a stafford loan through a bank, but be ready for some stuff rules and regulations.  Most students turn to banks loans only after they have been turned away by the government.

***Student Loans Secrets***

Banks might limit their loans to full time students and repayment options will be limited.  However you might find some incentives on re-payments of your student loans.

6.  State Student Loans – you will need to visit your local bank to pick up an application.  Most states offer a guaranteed student loan but the banks will adminsterd your funds.

***Student Loans Secrets***

These types of student loans are usually more expensive to borrow from when you compare them to federal loans.

7.  Additional Unsubsidized Stafford Loan - These types of student loans are determined
by the federal guidelines and are reserved for borrowers who fall into the “independent

8.  Other types of student loans – look at all your options and discuss these with your fiancial aid advisors at school.  Military dependents, corporations and businesses will offer student assistance. Don’t be araid to ask.

Additional Website Bonus

There is one place that will pay your tuition fees if you can repay them within a year.  Affiliated with around 2000 universities, Academic Management Services offer student asstance, but be ready for some expensive rates.  These funds should only be used in dire emergencies.

As you have read, each of the top 8 types of student loans offers a variety of options for those of you who need help and support.  The federal government is your best option but if you don’t quality you now have several options available.

I can’t stress the importance of submitting to FAFSA in January of each year. Once you receive your SAR then you can get down to business and find the type of student loans that meets your needs.

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