Since the cost of higher education in the United States is high, the student loans are becoming a necessity. This is because most of the students are unemployed and therefore, do not have enough funds to finance their education. A recent survey showed that about 70 percent of Americans every year apply for student loans to facilitate their studies. This article tries to shed light on the students’ loans;
Types of loans
There are two types of student loans: the private and the federal loans. The private loans are offered by private entities like Sacco’s, individuals and banks. Before the private entities provide you these types of loans, they will check your eligibility which will determine the interest rate on loan. Since some students are usually minors when they are joining universities, they can apply through a parent, guardian or cosigner.
The government issues the federal loans on the other part. In the United States, for instance, this type of loan is granted to students who have attained a high school diploma. There are three categories of the student loans namely the Perkins loans, the Direct PLUS loans, and the direct loans. Of the two types of loans, many people prefer the federal loans because of the lower rates and a flexible repayment plan.
Applying for the loan
For you to be awarded the student loan, you will have to apply for the same. Whether you want a private or a federal loan, you will have to fill out the necessary documentation. Once you have filled the forms, they will scrutinize them before deciding. To increase your chance of being awarded the loans, always ensure that you apply for the loans that you are eligible for.
Financial aid award
After you get admitted to the university, you will most probably receive a financial aid award letter. Many students are usually confused with this because many at times it comes with the grants and scholarships. Whereas the grants and scholarships are free money, the loans are not free since you will be required to pay for them once you clear college. Make sure that you distinguish the two since they may become useful to you soon.
Also get to know as to when the interest rates will begin taking effect. In some cases, it may start as soon as you get the loan, whereas in some cases it will only begin after you have finished college. This is critical as it will determine the amount of money that you will pay. When the repayment time comes, and you have more than one loan, then it is highly recommended that you consolidate your loans. If you are wondering on how to best refinance student loans, click on the highlighted link. Watch the video below on how the student loans work.