Student Loans – Living At Low Cost

As a student you are going to have to learn to cut your costs. Your income will be severely limited, and it will be vital for you to avoid unnecessary expense, and to keep any interest charges on loans to a minimum.

You will have plenty of company and will be able to compare notes with fellow students on how to eke out your income to the best effect. The final choice on how you raise the necessary cash for course and living expenses will however be yours. You will need to evaluate your options with care, and ensure that you make every pound worth as much as possible.

This may sound like a ridiculous statement, but bear in mind that you could easily reduce the value of your pounds if you commit to loans for which you will have to pay interest charges. Those charges must be paid come what may, if you are not to find yourself heading for a slippery slope on which interest is added to interest.

Let us emerge from this gloom! Interest free loans can be obtained – your Local Education Authority (LEA) is well used to dealing with these. You may find that, if your family income is relatively low your tuition fees will be paid for you in full, and there is a sliding scale which requires some payment from students from families who are over the threshold. You may have heard that all tuition fees are paid by the government, but sadly this no longer applies. Increases in university admissions made it no longer viable, and in addition a theory was applied which said that ex-students would be better able to pay off the costs when they were in well paid employment.

This theory was not applied fully, with the result that the maximum tuition fees for which a student is responsible is ¼ of the cost – currently around £4000, although universities do keep increasing their fees. The remaining ¾ of the cost is covered by the government.

Despite evidence to the contrary it is accepted that students need to eat and that a diet of beans may be high in fibre but can be exceedingly monotonous. This is where your LEA will help, and you need to discuss your situation with them as soon as the course which you will take is determined. They will work out what you can borrow and the student’s loan company will be responsible for ensuring that this money is available to you for the student year commencement.

We have already said that you need to avoid having to pay interest charges. Well, a student loan is as about near as you can get to this. Interest on the loans (which by the way are unsecured) will be at a rate which takes account of inflation, so that you will only pay back the equivalent sum to that borrowed. Best of all, no repayment will be required until the end of the tax year after graduation, and even then this stipulation carries ‘get out’ clauses. No repayment will be required until your income reaches a threshold which triggers the requirement; additionally, the rate of repayment will be adjusted to tie in with your earnings level.

There is yet another get out clause; if your earnings never reach the repayment threshold, they will be written off completely at age 65! It really is a shame that this type of loan is not more universally available!

Whether you will ever reach the repayments threshold is in your own hands to a large extent, and it could take several years after graduation before you do. During this time you will have the millstone of debt haunting you; currently the average on leaving university is over £10,000 and this is expected to increase considerably in the next few years. At least you have the reassurance that the amount owed is not increasing in real terms – there is no interest being charged on interest.

If you possibly can, avoid all temptations, especially of the financial kind. A credit card is a hand grenade if the hand holding it is desperate. Agreed, they are no problem if paid off in full every month, but this is not your aim is it? You need cash and you need it now. So very shortly you find that your repayment is inconvenient or impossible, and there you are on the aforementioned slippery slope of interest charges.

Banks offer interest free student loans but these also carry in-built dangers. You can usually borrow around £2000 (a sprat to catch a mackerel – they want your business when you are a high-flyer) but exceed your limit and wham!! You are just another customer and you are likely to find yourself paying for an unauthorised overdraft plus high interest charges.

Really, when it comes down to it, you have but one choice. Conduct your financial affairs with great care and in fine detail; you will benefit greatly in the short term and once you ARE a high flyer, then the world will be your oyster and maybe you will even be able to dictate the terms of a loan.

Federal Student Loans Versus Private Student Loans – Which Is Best For Me?

Federal Student Loans versus Private Student Loans – which is best for me?

You have gotten all the grants and scholarships you can, but you still need money for your education. It’s time to look at loans. But which is better – federal loans or private loans?

Federal loans

If you need to take out a loan to help pay for your education, you should always look at federal loans first. The largest source of education loans around, federal loans are long-term loans with low interest rates designed for students who need money for their educations. They have several benefits when compared to other borrowing options, including

- Lower interest rates

- Options to postpone payments

- Longer repayment terms

- Easier credit requirements

Eligibility for some of these loans, such as the Federal Perkins Loan and the Subsidized Federal Stafford Loan, are needs-based, while others are not. You will need to complete a FAFSA to apply for these loans.

The most common federal student loans are listed below:

Federal Perkins Loan

The Federal Perkins Loan is a low-interest loan available to students who have exceptional financial need, based on the information provided on their FAFSA. Undergraduates can borrow up to $4,000 per year, while graduate students can borrow up to $6,000 per year.

Federal Stafford Loan

The Federal Stafford Loan is available to undergraduates and graduate students. Loan amounts depend on a student’s year in school and whether they are financially dependent or independent. Your college’s financial aid office determines your eligibility.

Stafford loans can be subsidized or unsubsidized. Financial need determines which type a student is eligible for. Subsidized loans are based on financial need. The government pays the interest while the student is in school, in deferment, and in their grace period.

Unsubsidized loans are available to all students, regardless of income. The student is responsible for all interest.

Federal PLUS Loan

The Federal PLUS Loan (Parent Loan for Undergraduate Students) is a low-interest education loan for parents. Each year, parents can borrow up to the cost of attendance, minus other financial aid received (scholarships, grants, student loans, etc.).

The PLUS loan is not based on financial need. Qualified applicants must pass a credit check.

Private loans

Private loans are designed to supplement federal loan programs and are available from schools, banks, and education loan organizations. They are usually used to cover education costs that cannot be met by federal aid.

Terms for these loans vary according to the lender and your credit history. Keep these things in mind as you consider taking out a private loan:

- Private loans have credit requirements, and you may need a co-signer

- The lender determines the interest rates and fees, which may be affected by your credit score

- Private loans may not offer deferment options

- Private loan programs may offer borrower benefits, such as interest rate discounts or rebates

No matter what type of loan you take out, be conservative and borrow wisely! All loans have to be repaid, whether federal or private.