Quite different from your usual scholarship, a student loan is a form of financial aid which has to be repaid after the student graduates or any time he or she stops going to school for any reason. Just like other loans, student loans also come with interest rates.
There are many types of student loans and all have different requirements that need to be fulfilled, repayment options and the limit of the amount a student can borrow. Below are some descriptions about the loans to help you see and aid you in deciding which of the loans suit your need the most.
There are 2 categories that divide student loan types. Those 2 categories are Federal Loans and Private Loans. Federal loans depend upon the Federal Government whereas the Private Loans are the ones offered by the various private financial companies.
These are the student loans which depend upon the Federal Government. These kinds of loans are meant to cover the student’s educational needs such as the college and tuition fees. Federal Loans are never directly leant to the student and is either given to their parents if they applied for the PLUS loan or to the college they applied in. Plus loans or the so called “Parent Loans” are loans for undergrads made through their parents’ name. The loans are given directly to their parents.
Federal student loans come with already established maximum amount that a student can borrow. These maximums would depend upon the student’s year level as well as the cost of attendance which is set by his or her school. Students are not allowed to borrow money which is more than the actual cost of their education and if you are receiving other forms of financial aid, you would have to deduct that amount to the total amount of your Federal student loan. This is why most of the time; students are able to borrow a lesser amount of money than what they need to cover their education expenses in full.
How to apply for a federal loan? You would first have to fill up a free application form for the federal student aid. This form is the standard for anyone applying for a federal student aid. Afterwards, you would need to sign a promissory note where it states that you take the legal compromise for the repayment of the loan. Depending on the lender, the repayment of federal student aids can start within the first six months after you graduate, leave school or if you switch to part time assistance.
Private Student Loans:
If you are considering to borrow money to use for your education and want to borrow directly from a private lender or if you want to take out a private student loan a secondary source of money in the case that a federal student loan is not enough to cover your needs.
Like any other private loan, private student loans are based upon your credit score. So if you have a squeaky clean credit history, you won’t find any problems with your application and getting approved. If you don’t have such a brilliant credit history or if you don’t even have one yet, you would need a co-signer to help you apply for the loan. These loans are also given to directly to the student, unlike federal loans. The conditions for private student loans can vary from lender to lender. So be sure to find and then compare your options before finally deciding on a lender.