What is a student loan & How to Take a Student Loan in USA?
A student loan is a type of loan designed to help student to pay their educational fees and expenses so his education can be completed without any financial hurdle. From other kind of loans, student loan is very different. The interest rate is very low as compared to other types of loan and the repayment schedule is very delayed unlike other loans. Interest doesn’t accrue on the student loans till the student remains in the school. In Direct Project loan, any student of US can take part in loan taking process through its institute with the help of Department of Education.
What are 3 Basic Types of Student Loans?
In general, student loans can be categorized in three different types namely:
- Federal Loans
- Private Loans
- Refinance Loans
Under umbrella of federal loans, there are four categories in which these loans types could be categorized:
- Direct subsidized loans
- Direct unsubsidized loans
- Perkins loans
- Plus loans
In direct subsidized loans, government directly pays the interest rate on the loans when you are in school and it can be confirmed by your college that either you are eligible for it or not? For direct unsubsidized student loans, you are not required to show your financial need for getting this loan as in this type of loan, you are wholly sole responsible for paying the interest rate. Perkins loans are given by the educational institutes under the supervision of Federal Government. Students are responsible for the disbursement and repayment of loan to the institute. Plus loans are available on high interest rates and they also require a credit check as a warranty from the borrower. Loan borrowers who have adverse credit history would find it really difficult to get this loan but with the help of a guarantee, this loan can be taken by these affected people.
Private loans are those loans which are sponsored by different organizations and institutions but not by Federal government, following below categories fall:
- Bar Exam Loans
- Bootcamp Loans
- Credit by Union Loans
- Loans for International Students
- Share base Loans on Income
- Student Loans for Medical Students
- Loans by the State
- Student loans for bad credit holders
- Student loans without a guarantee
Private loans are different from federal loans as they don’t offer any kind of standard interest rates. Interest rate will solely depend upon your credit history (if any) and co-signer credit history and the options for which you qualify to get the private loan. Type of loan for which you qualify will change the total amount, interest rate and repayment schedule so you have to be very careful while finalizing your student loan. In private loans, lenders have different types as some provide loans to two year technical education degree student’s holder and some provide for four year under graduation degree holder students. Normally, undergraduate loans have low interest rates and majority of people try to avail that loan option. Graduate loans have higher interest rates as compared to undergraduate loans. While finalizing, your student loan you are required to check Federal Trade Commission, Department of Education reviews and Consumer Financial Protection Bureau reviews so that you will be in a great position to make a decision regarding your student loan.
- Parents Plus Refinance Loans
- Residency based Medical Loans
- After Residency Medical Loans
Refinance loan is best option for those who have saved some money so that you can qualify for this kind of loan. If you are financially stable and not struggling to pay your federal student loan then this is the best option to go with. If you are delaying your federal student loan repayments then instead of going for refinance loans, you should go for either consolidation of your student loan or you should adopt an income based repayment plan of your student loan.
What is most common student loan?
The most common type of student loan availed by students is
- Perkins Loan (at 2.75% interest rate)
- Direct Subsidized student loan (at 4.3% interest rate)
- Direct Unsubsidized Loan (at 4.3% for under-graduates and 5% for graduates)
- Direct Plus student loan (at 5.3% interest rate)
Federal student loans are the easiest one to get as majority of them don’t require any kind of credit check and even they don’t bother about your credit score while giving you student loan. Interest rates for these type of loans is minimum among all type of loans so one shouldn’t have to worry about interest rate and repayment schedule. It is really a possibility that you will be denied of student loan but there may be several reasons for it. But it doesn’t mean that if you get rejected then it’s all over, No; you can still rectify your mistakes and fulfill the required criteria to make a strong case for your student loan.
A student loan is a type of loan designed to help student to pay their educational fees and expenses so his education can be completed without any financial hurdle. From other kind of loans, student loan is very different. The interest rate is very low as compared to other types of loan and the repayment…