Types of Student Loan
Plus Loan
Plus loan refers to the type of student or education loan, offered to parents to help them pay for the education expenses of their children. This type of loan have also beenrecently added for graduate and degree students. It is important for you to have a good credit score to be benefited of applying for Plus loans. If your cost of attendance is $6,000 and you receive $4,000 in other financial aid, your parents can borrow up to $2,000. For the year 2008-09, the variable rate for these Plus loans is 5.01%. Interest is charged on a Plus loan from the date of the first disbursement until the loan is paid off. In this type of loan you can defer payments until after the student has left college. Parents who borrow $10,000 to pay for college fees, will owe about $14,000 if they are going to extend the term for the repayment of the amount.
The benefits of Plus loans:
- This type of loan has a fixed rate of interest and this will not increase the current rate of interest.
- Plus loans also offer free insurance, and the debt will be canceled if the parent or the student dies or becomes disabled.
- You can also get your payments deferred if you get into trouble financially.
- Opting for this type of loan your tax will be deductible, and it depends on your income.
Perkins Loan
Perkins loan is a low cost, government guaranteed loan that colleges offer to low-income students for their education costs. It is offered to undergraduate and graduate students who are in need of financial aid. A student can be benefited to a great extent by applying for this type of loan. The amount of Perkins loan you receive is determined by your school's financial aid office. It limits to $4,000 per year for undergraduate students and $6,000 per year for graduate students with cumulative limits of $20,000 for undergraduate students and $40,000 for both graduate and undergraduate students. The existing interest rate on all Perkins loan is 5%. This type of loan has the cheapest interest rate compared to other student loan programs. Perkins loans are subsidized loans and the interest is paid by the government until graduation, for any student enrolled for at least 6 months. The amount of the loan should be repaid on time. They are low interest loans and the maximum annual loan amount is $4,000 for undergraduate students and $6,000 for graduates.
The benefits of using Perkins loan:
- This type of loan carry a fixed rate of interest rate of 5% for a duration of 10 years which will give you time to repay the amount.
- Perkins loan is subsidized by the government, and interest does not increase until you begin to repay the loan.
Direct Loan
Direct loans are offered to the students through their school, which enables the interest rates to be much lower than a guaranteed student loan. For direct loans, the scheduled term for the repayment of the amount will be six to nine months after the student has completed school. This loan also includes direct subsidized loan, direct unsubsidized loan, direct graduate plus loan, and direct parent plus loan. For undergraduate students, the interest rate is fixed at 6% for the loans disbursed between 2008-09. For graduate and professional students, the fixed rate of interest will be 6.8% for the loans disbursed between 2008-09.
Direct subsidized loans are offered on the basis of your financial need. The rate of interest will not increase during the 6 months following the time of enrollment or authorized periods of deferment.
In Unsubsidized loans the rate of interest will increase from the time of disbursement until the loan is paid off. In this type of loan, if you make quarterly interest payments on your unsubsidized loan during periods when no repayment is required, the amount of the loan to be repaid will be reduced.
Guaranteed Student Loan
Guaranteed Student Loan is considered to be a blessing in disguise for the students. This type of loan can help you to get the required financial help regarding your education. The loan is extended from a bank under the financial guarantees, or insurance of the federal government. It includes Stafford loan, which has a low rate of interest and a student can apply for a subsidized or unsubsidized loans.
The benefits of guaranteed student loan:
- Opting for this type of loan will help you to get required financial aid.
- This type of loan has a low rate of interest and the loan is extended from a bank under the financial insurance of the federal government.
Student Loan Consolidation
Are you worried about the repayment of your multiple student loans? Student loan consolidation will definitely help you in this predicament. This type of loan is the simplest way to get you financial aid from multiple monthly payments to a low monthly payment. One of the main objective of student loan consolidation is that it merges all your loans and bills into one single payment. Opting for this type of loan, you can reduce the amount of the loan into single payment. It reduces your monthly expenditure on the repayment of the loan and gives you an extra cash in hand.
The benefits of using student loan consolidation:
- Consolidation will help you reduce your monthly payments and can lower the rate of interest.
- Opting for this type of loan will help you in consolidating your direct, private, medical or federal student loans into a single account.
- With this type of loan your monthly payment will be reduced to 60% and you will pay a single monthly payment.
