Archive for March, 2009

Few students nowadays can get through college without some form of student loan to help them out financially. With most students spending a minimum of three years studying, the costs of tuition fees, accommodation costs, living expenses and even books can soon mount up.

The main problem that many students have with their college lending is initially the fact that they simply do not know which route to take to get funding. After all, at this stage in your life you probably haven’t had to deal with borrowing money much if at all. But, as you probably appreciate, student loans do not come for free so it makes sense to choose the best and most economical option that you can.

Before you even make a start on choosing a college loan company or a loan sum you need to work out a budget. You’ll probably find that your parents will be a useful source of information here as they’ll have been down the budgeting road before. It’s important at this stage to make sure that you borrow enough to see you through but not too much.

The main types of college loan options available to you include:

#1. Federal backed loans — these types of student loans are government backed. The advantage to this kind of lending is that the lenders here have to adhere to Federal interest rate and fee levels. And, if you shop around you’ll most likely find a lot of lenders here who offer lower rates and fees than the recommended ones. The repayment schedules that you will ultimately have to use here are often better than those given by other student loan options. But, you will usually find that loans here have certain limits above which you cannot borrow any more money.

#2 Private student loans — these loans are often used once you run out of Federal options. They are offered by commercial lenders but the loans here are still specially designed for student needs. Bear in mind that the interest that you are charged here may be set at a variable rate (Federal lending may be given at a fixed rate) and interest rates in general will be higher than the state led system. You (and any guarantor you have) may be checked out from a credit rating perspective here before you will be accepted on to a loan program.

#3 Parent loans — parents can also take out specially designed loans to help pay for college costs for their kids. The most well known scheme here is probably the Federal backed PLUS (Parent Loan For Undergraduate Students) scheme. The money that can be loaned here can be used to fund certain types of college expenses. These loans remain the responsibility of your parents and they are the ones expected to make repayments. Unlike loans given to students in this way their repayment will not be deferred until their child has finished college.

In some cases you may find that you only use one of these options to get some cash to see you through college. In others you may need to use more than one loans method. In either case it is worth looking at each option in detail before you start applying for any kind of college loan to see which one gives you the best options.