There are different types of loans for students. The major types are federal student loans, parent loans, and private student loans. Other types of loans for students include peer-to-peer education loans and consolidation loans.
Of these loans for students, federal student loans may offer the best options for typical college or graduate students. This is because these federal student loans have a maximum interest rate limit. Providers are forbidden from jacking the interest rates up, regardless of the national economic reality. At the same time, the terms of these federal student loans are decidedly more lenient than the rest.
You can expect several alternatives for working off your loan. And, when you do, you are entitled to deduct a maximum student loan interest of $2,500 from your income tax returns.
There are even opportunities for loan forgiveness. This refers to programs where you pay off your federal student loans through volunteer community service. Now, that should make for easier and more varied ways to pay off your federal student loans.
Of course, some may still opt for private student loans. These private loans will definitely have higher interest rates. Likewise, there is no cap to how much interest rate these private lenders can give you. Usually, students select to get private student loans when they are unable to get a federal one or would need to supplement their current loans. Regardless, more discernment should be made when considering private student loans.
Here are some tips when considering loans for students:
1. Of all student financing options, scholarships and grants are, of course, the best ways to go. These financing options do not require you to pay off the amount you’re given. When you can, exhaust all your scholarship possibilities first before considering student loans, federal or otherwise.
2. When a student loan is your only viable option, get a federal student loan as much as possible. These federal loans are the easier alternatives in the long run. There are several resources online where you can sift through the available loans for you.
3. If your only resort is the privately-provided student loans, note that you will necessarily be getting a higher interest rate. This is because, as a student, you will likely not have any collateral to attach to the loan. You might get a lower interest rate if you have a guarantor but this isn’t always the case. When opting for a private student loan, research all your options first before choosing a loan provider. You will want the fairest interest rates and easiest repayment terms, as much as possible.
4. Ask your peers for student loan recommendations. This is a great way to know the different options, as well as other people’s experiences with these. Make sure to get feedback on the interest rates, repayment terms, and general business dealings with the loan providers. This will give you a good sense on how things will be in the long run. Remember that you will be dealing with your lender for a long times so might as well make the effort at this point