Student loans have become a necessity for nearly all students in America. With tuition on the rise every year, it’s no wonder that, according the American Student Assistance website, out of the 20 million Americans that attend college each year, 12 million of them will need to borrow annually to cover the cost. As it stands there are already 37 million people with student loans outstanding. With loans being so necessary to get higher education in America, it’s important to know what options are available to you if you. Here’s a little bit of information on each type of federal aid.
Stafford Loans
These are the most common type of student loans. A Stafford loan used to come in both subsidized and unsubsidized, the difference is that the latter starts to accrue interest as soon is the loans is paid to the student, rather than waiting until after the debtor has graduated. However, the loan now only comes in the unsubsidized form.
In order to qualify for a Stafford loan all you have to do is demonstrate a financial need. The easiest way to do this is to fill out a FAFSA form which is available at any college or university’s financial aid office. This form will ask a few questions about the income of the debtor and the debtor’s parents in order to determine how much money the student can borrow.
Perkins Loans
These loans are administered by the school. These loans are most commonly reserved for students who exhibit an exceptional need when it comes to financial aid. Unlike the Stafford loans can take as long as 20 years to pay off, the Perkins loan is required to be paid off within 10 years of graduating. Also unlike the Stafford loan, this loan does not accrue interest while the student is in school, a grace period or some kind of deferment period.
PLUS Loans
The PLUS loan offers money to borrow which is not based on financial need. This kind of loan is available to natural and adoptive parents or stepparents. The only requirement is that they have their credit in good standing. If they meet that requirement then they can borrow up to the total cost of attendance.
Consolidation Loans
If you already have student loans that you are working on paying off, especially if you have more than one of the loans listed here then it might be a good idea to consolidate the loans. What this program will do is offer a no limit loan for you to pay off your current loans. The consolidation loan will have a fixed interest rate. That rate is calculated by taking the weighted average of the interest rates on all your other student loans.
Even though the interest rates on most federal student loans are fixed, depending on the year in which you took out your loan it may have been lower. This is a great option if you have varying interest rates and are looking to lower your overall interest payments.