How Can I Find Out Whether I am Eligible for Student Loans?

Students searching for ways to obtain money for school have two choices: private loans or financial aid loans provided by the government. However, students should be aware of the difference between Pell Grants and student loans. Pell Grants are monies distributed to low-income students who fall under a certain income level. Pell Grants do not need repayment and allow students to obtain an associate’s or bachelor’s degree without needing to take out a traditional loan.

Private loans for students are available through financial institutions such as Wells Fargo, Citibank, Sallie Mae or SunTrust. These loans may be difficult to obtain unless the student has established good credit or can provide a co-signer with a good credit standing. Interest rates applied to a private student loan are based on the Prime Rate Index or LIBOR (London Interbank Offering Rate, in addition to the student or co-signer’s credit score. Interest rates applied to private loans are variable and begin accruing as soon as the student receives the money.

Other loans for college include the subsidized and unsubsidized Stafford loans provided by the U.S. Department of Education. These loans have a fixed interest rate and are extremely popular with students as a way of paying for undergraduate and graduate courses. Receiving a Stafford loan does not require students to possess good credit. Instead, Stafford loans are based on financial need similar to a Pell Grant, only Stafford loans require repayment once the student has discontinued attending school for six months.

A Stafford loan that is subsidized means the government is paying the interest on the loan while the student is enrolled in a college or university. Unsubsidized loans are not based on financial need and will start accruing interest upon disbursement to the student. Both loans are federally guaranteed loans.

Obtaining a college loan is often necessary to pay for tuition, books and living expenses while attending a higher learning institution, even if the student is eligible for a Pell Grant. Students and parents are advised to take out loans only when absolutely necessary. Moreover, students should pursue in-depth research regarding the total amount of student loan repayments and further investigate guidelines concerning deferment and/or forbearance possibilities in case financial hardship.

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