Student loans: How to give your child a better education and not end up in debt
Each of us wants the best for our child. We try our best to ensure that children get the best food, the best clothes, the best toys, and, of course, the best education because education is the lucky ticket to the future.
Of course, we cannot control the whole life of a child. But we can make an effort and give him all the necessary tools to build a happy life. And quality education is just one of those tools. However, the whole problem usually lies in the cost of education. Private schools, good universities - all this requires money and, let's be honest, not small ones. And for middle-income parents, it's hard enough to raise a child, pay for a good school, and save up for college at the same time. Therefore, do not forget about the help that is always there. This assistance is loans for education.
What are student loans?
Student loans are a targeted type of financial assistance, which implies assistance in obtaining an education. Student loans can be used to pay for tuition in the first place. But in addition, such loans can be used to pay for textbooks, on-campus or off-campus housing, travel expenses, meals, and the purchase of other educational supplies. You can also use a student loan to pay for tutors or various training courses.
How does a student loan work?
Student loans are usually unsecured and long-term. However, the length of a student loan can vary depending on the loan and the lender, typically ten years for federal student loans and 5 to 20 years for private loans. Most often, student loans offer fixed rates, and their amount depends on the type of loan you choose and, of course, the lender.
Types of student loans
There are two types of educational loans - federal and private. Federal ones, in turn, are also divided into several types, depending on the family's financial situation and the student's needs.
Federal student loans
Federal student loans are those issued by the government. By taking out such a loan, you are participating in the Federal Student Loan Program of the US Department of Education, and your lender will be the US Department of Education. Federal loans are more affordable and have lower interest rates than private loans. Federal student loans are also more flexible. For example, you will be able to change your repayment options even after the loan has been granted to you. In addition, you can make payouts based on your income. Also, the strength of the federal loan is the fact that the borrower's credit history does not play a role in obtaining it, except for the Direct PLUS loan.
In addition, there are several programs from which you can choose the one that suits you best.
Direct subsidized loans are suitable for students with financial problems who will be able to confirm them with the necessary documents. The borrower of such a loan may not pay interest while learning at school, at least during an incomplete working day, during deferment (a period when loan payments are temporarily postponed), or during grace (the period, usually six months after you graduate or leave school, before you begin to make principal and interest payments).
Direct unsubsidized loans are not based on the financial situation of the borrower. Your school bases the amount you are permitted to take off on the cost of your visit and any other financial aid you may be receiving. Interests accrue at all times, and at a specific point during the loan term, they may be capitalized (when unpaid interest is added to the principal loan amount), which can raise the total cost of the federal loan.
Direct PLUS loans are unsubsidized federal loans available to graduate and professional students as well as parents of dependent students. After all other forms of financial aid have been used up, PLUS loans can assist with covering educational costs up to the cost of attendance (the amount of money your school believes you'll need to enroll there for one year). Financial need is not a factor in eligibility, although a credit check is necessary. Those with a poor credit history must fulfill additional conditions in order to qualify.
Private student loans
A private student loan is not much different from a personal one. Sure, such loans are designed to pay for training and related expenses. For example, good credit history and income confirmation will be required to obtain a private student loan. The interest rates will be higher than for a federal student loan, but the terms can be longer - up to 20 years, depending on the creditor and loan.