Student Loans: Federal programs vs. Private loans

Student Loans: Federal programs vs

Student Loans: Federal programs vs. Private loans

According to a study, those students who have completed their college education are more relaxed and satisfied compared to those who do not have college degrees. In spite of the fact that a lot of students have to settle their education debts with debt consolidation loans later, a college degree has become a necessity for the students. Moreover, it is a gateway to the professional life and it is well known that without higher education, the students are less likely to get good jobs in future. Although weird that it may sound, a study reveals that college students live longer than their high school counterparts! The federal government has many loan offers. Let us at first review the offers that are available at the federal level:

Parent plus Loans: This loan is different than the other loans which are offered by the Government. Under this category, the parents are provided with the loans instead of the students. The application process is similar to that of a normal bank loan; the loans are approved on the basis of the credit score. These loans can be utilized for the tuition fees and other expenses such as books and supplies.

Subsidized Stafford loans: These loans are provided to the students on the basis of their financial priorities. Under this category, the students who belong to low income groups are considered before others. The Government is responsible for paying the interest on the loans until the students are out of college.

Unsubsidized Stafford loans: These loans are provided to all students irrespective of their financial needs. Unlike the subsidized category, the interest on this loan option remains as unpaid until the students are out of college and repay the same.

However, it is unheard of except for isolated cases, that the government student loans are not sufficient to cover the huge costs of college education. This is the exact reason for the students to also look for private loans in order to fund their studies. The private loans can actually act as a bond between the high costs of the college education and the limited amount that the government loans offer. Although the private loans are costlier than the government loans, they have flexible repayment offers which are convenient for the students. However, the eligibility of private loans will depend on the credit scores in the majority of cases. On the other hand, the terms of the government loans are far better than the private ones; that is why, the private loan options should be taken into account only when the other options are exhausted. While the interest rates on the federal loans remain fixed, for the private loans it will keep varying; but with private loans will have such offers as a deferred repayment which a federal loan does not have.

Therefore, the students and their parents resort to private loan options only when the federal offers are not enough to cover the costs. While the rules of the federal loans are far more relaxed, the private loans can help the students by providing 100% coverage for their college education.

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