The Scoop on Student Loans

Taking advantage of the right college loans can help students cover their higher education costs without going into major debt. And, both online degree and traditional college students may avail themselves of these loan programs.

It is critical that students understand that making poor student loan choices can be very costly. Here are a few of the things they should know to avoid financial problems.

There are two student loan categories… subsidized and unsubsidized. The former loans are named as they are because their cost is partially subsidized by the federal government, which substantially reduces the interest payments. Students must demonstrate financial need, as determined by the FAFSA financial aid form to qualify for a subsidized loan. Subsidized loan totals are limited, and loan repayment typically starts six months after a student has left college.

Unsubsidized loans, however, are available to all students, regardless of their financial standing. Overall, unsubsidized loans are available for larger amounts than are those which are subsidized, and unsubsidized interest rates are somewhat higher.

Generally, students who are eligible for for unsubsidized loans require the maximum they are allowed to borrow. If they require additional funds, they may also take out unsubsidized loans.

The most common student loans are the Perkins Loan and the Stafford Loan. Repayment begins six months after a student leaves college (for any reason).

PLUS Loan, sometimes known as Parent Loans, may also be available to families. These loans, like the others we have mentioned, feature a relatively low interest rate. Repayment commences sixty days after the loan is awarded.

Be aware that student loans must be repaid, without exception. Leaving college before graduating and/or declaring bankruptcy does not negate the need for complete repayment. However, lenders will almost always work with anyone making a good faith effort to repay their loans. So, if you are encountering financial difficulty, you should immediately notify your lender(s). Those who avoid contact with lenders and miss payments may have their earnings garnished or their income tax refunds withheld.

Traditional college students and online college, students alike can benefit from the wise use of student loans. In fact, most students find that student loans…investments in themselves…are among the the best investment they make. But borrowers must remember two things. The first is that borrowing should be limited to cover the costs of educational necessities (not for luxury items). The second is that there are likely to be serious consequences if they do not repay their loans as agreed.