One of the many ways to finance your college education is through
taking out a loan. There are loans available specifically to cover
the cost of higher education.
Types of Student Loans
Student loans can be categorized by who determines the terms and conditions of the loan. Guidelines for some loans are determined by the federal government. These are called federal student loans. Sometimes the funds for federal student loans comes directly from the federal government. Banks can also fund federal student loans. In this case, terms and conditions of the loan are still governed by the federal government.
The second type of student loan is private student loan. These loans, and their associated terms, are provided by private banks.
Applying For Student Loans
To apply for federal student loans, you only need to fill out a FAFSA, or Free Application for Federal Student Aid. The application requests personal identifying information like your name, address, and social security number, along with information about your school attendance for the upcoming school year. You should fill out the type of degree you'll be obtaining, your grade level, and the type of degree you will be seeking. The application will request financial information for you and your parents to determine the types of aid you are eligible for.
The application process for private loans is less stringent; however, the requirements to get approved for a loan are stricter than with federal student loans. Private student loan lenders check your credit history and income before approving you for a loan.
In both cases, lenders check to make sure you will actually be attending school before giving you the loan.
Student Loan Costs
The cost of a student loan is applied as interest. The lower your interest rate, the lower the cost of your student loan.
It's important to know that interest begins accruing on your student loan as soon as you receive it. With some federal student loans, the government pays the interest as long as you are in school. With other kinds of student loans, you are responsible for paying student loan interest while you are enrolled in school. There are options for deferring interest payments until after you graduate. If you choose to defer interest payments, the interest will be added to the balance of your loan, increasing the total amount you owe.
Repaying Your Student Loans
After you graduate school, you typically have a six month grace period before payments are due on the loan. Once this grace period has ended, you must begin making regular payments on your student loan to remain in good standing with the lender. It's wise to call your lender before the end of the grace period to find out the amount of your monthly payment and any repayment options available.
