You probably have a lot on your mind as you're preparing for your first year of college. The cost of textbooks, where you're going to live, what your professors will be like and how you're going to get through finals week are some thoughts that could be swimming around your head. As you're deciding what color highlighters you need for your classes, don't forget that you might have to apply for student loans. This is a complicated part of the college experience, and you should be aware of all the options you have. This quick guide can give you a rundown of a few of your loan options and how they work:
This is a federal loan, which means it is distributed by the government under the Federal Direct Student Loan Program. Stafford loans are one of the most popular choices among college students because they come with low interest rates and various repayment plans. You can choose between two types: subsidized and unsubsidized. Subsidized loans are usually given to you if you can show that you need financial aid, while unsubsidized loans do not require you to show evidence that you need financial help. Financial need is determined by the difference between the tuition costs of your school and your family contribution, which is how much you and your family pay.
For both types of Stafford loans, you're allowed a six-month gap after graduating before you have to pay them back, which is a good time to start saving. The general time frame to pay back this loan is 10 years, and there are a number of repayment options you can try. Another thing to keep in mind is that there are no penalties for either of these loans if you pay them off early.
For a Perkins loan, you have to show evidence that you require financial aid. This loan comes with a fixed interest rate of 5 percent and can be helpful because the government will pay for the interest while you're in school and for a brief time when you're done.
With repayment, you are given a nine-month grace period after you graduate, and the time frame to pay off a Perkins loan is up to 10 years. You're not given too many repayment options, but if financial troubles occur, you could be eligible for several types of deferments, according to American Student Assistance.
Parents can also take out loans in order to help pay for your schooling with a PLUS loan. The catch is that they cannot have any bad marks on their credit report and must have a good score.
Institutional and Private
These two options are similar in that they are not provided by the federal government. Institutional loans are given by your university, and private ones are distributed by your lender after you apply for them. For private loans, you will have to show your creditworthiness. If you don't have a strong enough credit score, you will need some credit help. You can ask your parents if they will be a cosigner. Each type of loan has its own repayment plans and interest rates.