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College Loan

Check into loans that involve borrowing and repaying money. By taking a loan you are using your personal credit to make an investment will result in greater future income—part of which will be used to repay the loans and the interest. The federal government subsidizes some educational loan programs and pays the interest as long as the borrower remains a student in good standing. In other cases, students are required to pay the interest while still in college. Repaying the loan principal is deferred until the student graduates. Sources and types of loans include these:

Federal Perkins Loans
This valuable loan program gives the first priority to needy undergraduate students. To be eligible, students must establish a very high need on their student aid application (FAFSA). Because of the limited funding of the program, the maximum annual loan amount is $4,000 for undergraduate students and $6,000 for graduate students. The interest rate on the loan is currently set at 5 percent a year. Interest and principal repayments are deferred until nine months after a student graduates or attends school on less than a half-time basis.

Federal Family Educational Loan Programs (FFELP)
There are three different loan programs for FFELP. Two make loans directly to undergraduate or graduate students—and are known as Stafford Loans. The federal government subsidizes only one of these Stafford Loans. The third loan is a program of loans to the parents of a dependent undergraduate student. The parents are completely responsible for the amount of the loan, plus interest.

Federal Subsidized Stafford Loan Program
Federally subsidizes Stafford loans start with the (FAFSA). The amount borrowed is set by the government—currently between $2,625 and $5,500 per year for undergraduates.

Graduate student loans are up to $8,500 per year. To remain eligible, students must be enrolled on a half- to full-time basis. The federal government pays the interest on these loans as long as the student is enrolled. The liability for interest and principal repayment shifts to the student six months after either graduation or loss of eligibility due to enrollment status. The funds for these loans are borrowed and repaid to a bank that participates in the FFELP program. College or university financial aid offices keep lists of preferred lenders to give you a start.

Federal Unsubsidized Stafford Loan Program
Similar to the subsidized Stafford Loans, unsubsidized loans have the differences of not being strictly need-based. You are also charged interest as a student. Application for the unsubsidized Stafford Loan program is made by filing a FAFSA; however, eligibility is not determined by need, but rather by the difference between the cost of your college choice and the resources of your student aid package. The college student aid office makes all calculations. The maximum amount of the loans and interest rates for the year are the same as those of the subsidized Stafford Loan program. Interest charges begin the day the loan funds are received. The bank determines loan payment and repayment provisions. A list of preferred banks is available from the college student aid office.

Federal Parent Loans for Undergraduate Students
This program gives loans to the parents of undergraduate students who are dependent on their parents. The parents must complete a PLUS Loan application form, available from the college financial aid office. The college financial aid office must certify both the costs of attending the college of choice and the anticipated financial aid package to be awarded to the undergraduate. The funds for PLUS loans are made available by a participating bank. Loan terms, including repayment provisions and interest rates, are more favorable than those of other education loans available. Repayment of PLUS loans begins as soon as the funds are advanced to the borrower. Ask for more information at the college student aid office.

Private Loans for College Expenses
Consider private loan programs, too. The interest rates and repayment plans are not as low as the federal loan programs, but are still worth considering. Private loan programs may be a last resort, but they are still better than dropping out of college.

Bank Loans
If there are no possible lenders in your circle of family or friends, consider banks and lending agencies that participate in loan programs with the college you are going to. The student aid office should be able to provide a list and perhaps even application forms for private loans from participating lenders. These loans will ask for paperwork to determine your credit worthiness. They also will be limited to the difference between your documented cost of college attendance and the sum of all other sources of income you have.



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