Posted on Wednesday, 25th August 2010 by admin
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As a marketing campaign, those institutions who provide student loans state that taking student loans is like investing for the future, now who knows what the trick behind this statement is.
Those who understand this know that is a lie and students are made to take a loan by showing it as a good thing. Contrary to what they state, despite the rececssion being a bit on the lower side today, fresh graduates are facing a very dim future because of their huge amount of loans.
This type of loan tends of backfire when your time for graduation arrives and due to this most student even think of suicide to escape their burden. Those students who will start their college in the coming fall semester need to do proper research behind the good and bad points of availing student loans. If u do this research you might as well save yourself from the worst debt trap.
Rule 1 – Look Up All The Available Options Of Free Money
Before you set out to look for a loan, the first thing which you need to do is look for all the possibilities to avail free money . This could be in the image of grants or scholarships. For students, there are thousands of scholarships available which you could always tap on. For such type of money you wont have to get worried as grants and scholarships are funds that you will not have to repay ever. It will be just yours to use towards your education if you can get it.
Rule 2 – Exhaust Your Federal Student Loan pPossibilities
After analyzing all the options for availing free money, don’t just set out to look for private student loans. The second thing which you should do is look into Federal Student Loans and see if you can a loan from Stafford, Perkins and PLUS.
Federal student loans are federally guaranteed fixed-rate loans. The general rule of thumb would tell your that try to take a federal student first and if not then try and find a private loan.
The mere advantage of the federal loan would be that the amount of interest charged on it would be fixed unlike the private loans. Further on, it offers you flexibility in the sense that you could pay back your loan according to your convenience.
Obama’s current student loan reform can only help students with the repayment if the loan they have is a federal loan and not a private student loan.
Since the advantages of Federal student loan outweigh those that of private student loan it is recommended that you try your best to avail federal loan. It also gives you the chance to have a repayment suspension up to three years in a situation where you cant pay your installments due to any reason or financial difficulty.
The biggest advantage that the federal loan offers you is that there are various number of programs which allow you to have the remaning balance in your loan debt to eliminated or forgiven based on your performance in college.
Rule 3 – Understand private loans before applying for one
As trends have shown in the past that by the time you are about to graduate, your debt is almost in six figures. It would be a very difficult task to find a student whose debt it not in six figures. If you pay attention to your debt now, you would see this figure changing to six by the time you are close to your graduation. Therefore it is very important to choose the funding sources for your education.
One major factor which needs to be highlighted is the main disadvantage of taking a private student loan. This factor is that you cannot fix a percentage on interest which would be charged on your principle amount.The interest varies with a certain benchmark. The rate that you might agree to today, might be tripled by the time you graduate.
In conclusion after analyzing how an average student cant make the most of their available resources inorder to avoid a private loan, it could be said that most borrowers are not careful enough in comparing and shopping around for student loans. Always try and make sure that you look around for lenders before applying for a loan. Make sure you look around and compare lenders before taking out a loan.
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Tags: Credit, Debt, federal student loans, finance, interest, private student loans, student loan, Student Loans, Student loans in the United States
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