By John Williams
A student loan helps you get through college. Then you come out
into a high-paying career. It's a great investment in your (or your
Student loans generally give you a good deal. You get
below-market interest rates, and you get a $2500 federal tax credit on interest
paid over any period of time (previously first 60 months only)
It doesn't matter if the student, or parent takes out the loan;
tax deduction remains the same.
* Did you know the federal government has a $50 billion student
loan program ?
Not surprisingly, the federal government provides the largest
percentage of student loans. Other student loans may come direct from colleges,
private lenders or state governments.
One of the key advantages to a federal guaranteed loan is
exactly that - it's guaranteed. That means you don't need collateral. It also
means the terms are kinder than a typical lender might offer. Of course, your
educational program has to be approved by the government.
Types of student loans
* Federal Stafford Loan - for undergraduate or graduate students
A popular and cost-effective source of a student loan. Stafford
loans provide low-interest, government guaranteed funds.
Stafford Loans come in two types, subsidized or unsubsidized.
Whether or not you're eligible for subsidized depends on household income. The
school ought to advise on this.
For subsidized, the government covers the interest right up to
start of repayment i.e. they pay interest incurred during the course, in
deferment and during the grace period before repayment begins. If you qualify
for subsidized, it's a great deal
For unsubsidized, the student must pay all interest incurred at
all times, though they don't start repaying until after grace period.
* Federal PLUS Loan - for parents of undergraduates
Parent Loan for Undergraduate Students (PLUS) allows parents to
take a loan on their Childs behalf. They can contribute to their Childs future,
and get a great low- interest loan with continuing future tax relief.
PLUS actually allows parents to borrow the total cost of their
child's education, minus any grants or other financial aid awarded. All tuition
fees, meals, books, transport etc. can be included in the loan.
This really is a great deal, and has no income or asset
requirements. Even poor credit history may be overcome. Repayment is flexible,
and can include zero payments for up to 4 years.
Only one drawback to the Federal Stafford and Federal Plus loan
- your school must be approved to participate in these programs. If your school
isn't approved, then you've got some other options...
Many banks offer unsubsidized Stafford loans. You still get the
money, which you must have to attend college, but repayment options are more
limited. Some deals offer you an interest rate reduction if you make payments on
* State Loans
Most states offer guaranteed student loans. Apply direct to
Banks, who'll administer the State program. It's usually a more expensive way to
borrow than Stafford.
* College Board Extra Credit Loan
Administered by your college. Can be expensive, and best used
only in an emergency e.g. your aid is withdrawn.
* Other Loan Sources
A number of other sources may be worth trying if you get a
problem with your first choice lenders. Academic Management Services affiliates
with approx. 2000 schools. AMS pay your tuition fees if you repay them in less
than a year. College Resource Center also has loans available.
If your parent served in the military, then a military loan
should be investigated.
College can be the experience of a lifetime. A child starts
college as a high school kid, and emerges a full grown adult with high-earning
But he or she needs money to survive and thrive in college. This
article looked at the main sources of student loan funding, and those sources
should be ideal for most students and their parents.
The right Student Loan makes all the difference to a successful college career.
Discover important information
on choosing the right student loan, and guaranteeing your future success. Click