Student Loans: The Basics
By Bryn Dunbar
A recent article in The Huffington Post reported that “student loan debt, the largest component of household debt other than mortgages, rose 3.4 percent to $904 billion.” This staggering amount has fueled many concerns about student loans. If you are considering using student loans to pay for college, you need to look beyond the rumors and understand the options that are available.
There are a variety of student loans available such as federal loans, state loans, institutional loans, and private loans. The different types of federal loans are Federal Perkins Loans, Stafford Loans, PLUS Loans, and Consolidation Loans. Federal Perkins Loans are made through participating institutions while Stafford, PLUS, and Consolidation can be obtained from one of two US Department of Education Programs: William D. Ford Federal Direct Loan (Direct Loan) Program or Federal Family Education Loan (FFEL) Program. The amount, interests rates, and qualifications for these loans can vary. The Guide to Federal Student Aid’s websiteprovides facts about federal student loans and includes helpful comparison charts so you can choose the loan that is right for you. The website also has information about federal grants and the Federal Work Study Program.
State loans can be obtained from state funded programs. For example, South Carolina offers the South Carolina Teachers Loan to encourage students who qualify to become teachers. You can find out more information by contacting your state’s office of education.
Institutional loans are loans offered directly by some schools. For example, Loyola Marymount University in Los Angeles, California gives students the option of borrowing from the school at a low interest with a fixed rate. Try going to the website of a specific college or university you are interested in to learn more about the loans that institution offers.
Private lenders like banks also offer student loans, which are based on prime interest rates. These loans are usually competitive so make sure to look at multiple banks to make sure you get the best rate. In addition, banks usually offer low interest rates. Chase, Citibank, Sallie Mae, Wells Fargo, and Bank of American all offer student loans. Remember it is always important to understand all the terms and conditions of a loan before making any sort of commitment.
You can also find more information by reading about common student loan myths. In her blog post for Huffington Post Education, ”5 Myths About Student Debt,” Mary Nguyen, a graduate student at Johns Hopkins, debunks some general myths about the problems of student debt. Citibank features an article “Common Financial Aid Myths” which disproves myths about financial aid eligibility. Finally, an article for Forbes.com by Michelle Asha Copper, “Five Myths about Student Loan Delinquency,” explains what really happens when people cannot pay their loans. All of these articles provide interesting views of common misconceptions about student loans.
When it comes to student loans, it is important to always stick with facts. Research and understand whatever plan you choose. Paying for your education is important.