You can’t afford not to know how student loans work. With the cost of higher education rising quickly, you’ll probably need financial assistance to pay for tuition, fees, room, and board. As the educational expenses are soaring, education loans have become very common means of financing higher education. Most students expect to earn high salaries at the end of their professional training and are likely to be in a position to repay these loans over a period of time. MoneyMindz, Financial Advisory Portal introduces you with the various options available to help students pursue their desired education and reach their career goals.
Here’s a quick guide to student loans. These are some basics of how student loans work, from start to finish.
Types of Student Loans
Student loan options fall into two main categories: federal and private. Federal loans, which are funded by the federal government, are very popular and offer many advantages that you may be eligible for throughout the life of the student loan. These include interest rates that are fixed and generally lower, income-based repayment plans, and temporary relief if you’re facing unemployment or other challenges.
How to Apply for Student Loans?
If you’re applying for federal student loans, you need to submit a Free Application for Federal Student Aid (FAFSA). Some people assume they won’t qualify for aid because of how much their parents make or a low GPA, but that’s a mistake. Everyone who needs help paying for college should fill out the FAFSA. The form is generally available on October 1 for the following school year, and you can apply online.
If you’re opting for private student loans, find a reputable lender and make sure your school and program are eligible for their offerings. The application process may be free, depending on the lender. Most lenders will want you to provide basic personal and financial details, and the lender may also consider your credit history. You can usually apply with a co-signer, such as a parent, which may give you a better chance of getting approved with a good interest rate.
Understanding Student Loan Interest Rates
Interest is a percentage of your principal loan that you pay the lender in exchange for borrowing money. Fixed-rate student loans have an interest rate that stays the same over the life of the loan. Although the rate might start off higher than on variable-rate loans, it won’t change as general interest rates fluctuate.
Variable-rate loans, also called floating-rate loans, have an interest rate that may can vary every month, quarter, or year. It usually starts off lower than a fixed-rate loan, but can change dramatically over the life of the loan.
If you expect to pay off your student loans right away, a variable-rate loan may be a good option. But if you’re not sure how much you’ll be making after you graduate, you don’t think you’ll be able to pay your student loans off ASAP, or are risk-averse, a fixed-rate loan is a good choice.
When to Repay Your Loan?
As long as you’re still in school at least part-time, you don’t have to start repaying most federal student loans until after you graduate. The only exception for federal student loans is PLUS loans, which require you to start making payments as soon as you receive the entire loan amount.
Your loan servicer will give you a repayment schedule that will tell you when your first payment is due and how much you owe. Private lenders can decide when they want you to start repaying your loans, so make sure you review your student loan agreement closely before signing.
Most federal student loans have a six-month grace period, which gives you a break after you leave school before you have to start paying your loans back. (PLUS loans don’t offer this perk.) Some private lenders also offer grace periods, but it’s not a guarantee. Whether your student loans are federal or private, in most cases, you’ll still accrue interest during the grace period.
Many lenders offer interest rate reductions if you have your student loan payments automatically deducted from your checking account. Be sure to look into that—who doesn’t like a discount?
Kuber Mindz, Friendly Financial Adviser wants to help the students in pursuing their aspired education and achieve the desired career goals through a convenient education loan plan. As after attaining proper education one tends to face the world with confidence by creating his/her identity and independence.
For more information visit www.moneymindz.com or give a missed call to 022-62116588.