Guide to Student Loan Options

With the rising price of tuition, plus the associated expenses of books, lodging, and food, is it any wonder that the majority of people attending college these days have a bunch of student loans to pay off by the time they finish school? It seems like very few have the financial means to get through college without at least one loan. If you’re like most college students, or are a potential college student, you’re more than likely on the lookout for reasonable sources of financial aid to help you get through school. Don’t despair. There are a number of sources for student loans. Following is a guide to your options.

Determine Your Needs
Before you jump willy-nilly into a loan for college, you need to examine your needs. Sit down with a pencil and a piece of paper and make a list of all of your anticipated expenses for the entire school year. Work out a budget on a week-to-week or month-by-month basis. Be sure to include the cost of food, lodging, and books in your computations. You may also want to include a margin of error for unanticipated expenses that are sure to pop up from time to time. Take your time and try to foresee every likely possibility. Once you’re reached a figure, you should back away from the list for a couple of hours, then return to it and go over your figures to see if you’ve made any mistakes. This is an important step because any money you borrow will eventually have to be paid back, and you want to keep the figure as low as possible–which means you’ll have to live within your proposed budget.

Types of Student Loans
Basically there are two types of student loans–those sponsored by the federal government and loans secured from a private lending institution. There is a third method that is becoming more popular each year. Before you decide on the type of loan that will work best for you, it’s essential that you research the benefits and potential downside of each.

Government Loans
Student loans taken out through the U.S. government are called Stafford loans or Perkins loans, and come directly from the United States Department of Education. The loans will come through a participating school, and you must meet certain criteria in order to qualify. You need to be enrolled in a four-year college or university, a community college, or a trade, career, or technical school. Stafford loans normally don’t have to be paid back until after you graduate from school, but if you quit early, you could be required to start paying the loan back at once. You will have to fill out a FAFSA (Free Application for Federal Student Aid) and go through a review process before being accepted. Perkins loans are need-based, and carry a fixed 5% interest rate throughout the term of a loan, which is usually 10 years.

Private Loans
A private loan is just that, a loan from a private financial institution for the purpose of your college education. While the terms of a federal loan are pretty standard, the terms of a loan through a private lender can vary considerably. If you have a good credit rating, your interest rates can be reasonable. However, if you don’t have good credit your rates could be exceedingly high, and you may even be required to have a cosigner. The terms for a private student loan are left entirely up to the manager of the financial institution you’re working with, which includes the terms for repayment.

Peer-to-Peer Lending
Another type of student loan that is gaining in popularity in recent years is peer-to-peer-lending, which is basically a financial transaction between independent parties whereby one person borrows money from another. As with any other type of loan, there is an expectation that the borrower will repay the money in a timely manner according to the terms of the loan. Simply because a peer-to-peer loan doesn’t involve a traditional lending institution or the government doesn’t mean it’s not a formal agreement. Instead the terms are agreed to, drawn up, and signed as they would be with any other type of loan. The main reason for taking out a peer-to-peer loan instead of a private or government sponsored loan is that your credit rating may not be good enough to get a private loan at reasonable interest rates, or your grades aren’t high enough to qualify for a government loan.

Guest post from Quinn Green. Quinn writes about accredited online degrees for


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