In this article, you will find everything you should know before taking out student loans. Before accepting a loan there are some things you must know. Keep reading to learn all about it!
In this article, you will find everything you should know before taking out student loans. Before accepting a loan there are some things you must know. Read on to learn all about it!
Getting a handle on the central concepts of student loans as early as possible can help with borrowing choices now and the repayment process down the road.
In the first place, you must know that the Free Application for Federal Student Aid, or FAFSA, is a government form that students must complete in order to be eligible for government-provided benefits things as state grants, work-study funds and federal student loans.
Also, you need to be aware that when taking out loans, there are two primary elements. The principal and the interest. The principal is the amount you borrow and will need to pay back. The interest is what the lender is charging you for the loan.
Interest is calculated as a percent of the principal. The interest rate on a federal student loan is set by Congress through legislation, while the interest rate on a private student loan is set by your lender and can be affected by a variety of things.
What is more, federal student loans are funded by the government and offer a number of flexible consumer benefits that make them the go-to option for a majority of student borrowers. Federal student loans tend to offer greater repayment flexibility than private loans.
Federal student loans generally fall into one of two categories: subsidized or unsubsidized. Subsidized loans are limited to students who demonstrate financial need. If you qualify for this type of loan, the government pays the interest while you attend school and, in some cases, for six months after you graduate, as well as during a deferment period.
Unsubsidized loans, on the other hand, are more widely available but do not offer this benefit. While you won’t have to start making payments on an unsubsidized loan until after school, the interest that builds up while you attend will be added to your principal for you to repay later on.
Finally, the Federal Perkins Loan Program, also referred to as a Perkins Loan, is a student loan program offered to students with exceptional financial need. Your school acts as the lender, the funds are limited, and not all schools offer them.