If you’re planning to go to college, one of the key things you’ll be researching into is financing options.
Going to college or university in 2019 is expensive, especially in the US, so every option needs to be considered. There are multiple options, including scholarships, private loans, and government loans.
There’s not necessarily one option that’s better than the others depending on your situation, but it’s necessary to understand the positives and negatives of all options before making your decision.
Government Student Loans
Loans offered by the government are done so through the Education Department, and can be done by applying to the Federal Student Aid free application process. The details on this form will help to understand how much loan you may be applicable for. This will depend on parent and family earnings, disabilities, and additional needs such as young children.
Outside of the government, you can also apply for loans privately. These loans are offered by companies that specialize in student loan, and can be applied for in banks and credit unions as well.
The lender will perform a similar process to the government to assess your validity and how much risk is associated with you.
If you have bad credit or low earnings, this may mean you need a parent or other beneficiary to sign the loan for you, so that the lender is comfortable with lending you the money. To find out more about private education loan finance, try to look at websites like ELFI, which have a significant amount of information on this topic.
As you start to pay your student loan back, the interest attached to the loan you have will become very important. When you owe the most amount of money at the start of your repayment terms, you’ll naturally see the highest amount of interest being added to your total balance owed. This means it’s essential to be aware of the interest rates and not be caught out by overly high rates.
Federal government loans will generally be by a fixed rate, meaning they won’t change through the course of the loan repayment term. Most federal loans are set about 2% and can’t exceed 9.5% regardless of the financial situation of the borrower. This is useful as you’ll know exactly how much you’ll be paying back throughout the loan.
Private loans are more varied depending on your financial situation and your credit. If these are both deemed to be good by the lender, then you may get an interest rate that’s even lower than that of a federal loan. On the other hand, you won’t get the same fixed rates of interest as you can for government loans. This means the interest rates are liable to change depending on the market. This may make you more likely to refinance your loan from time to time to ensure you have the best interest rate in the market.