Choosing the right college loan(s) will help students finance their education and avoid a bad experience when repayment becomes due. Failure to understand the rules and the options, on the other hand, can lead to unpleasant surprises and serious financial difficulties.
Student loans are separated into two categories; subsidized and unsubsidized. The chief difference between the categories is who is responsible for the interest during the time a student is actively enrolled in a college or university.
Subsidized student loans are limited to students who demonstrate financial need: students whose incomes are not sufficient to meet college costs. There is a fixed limit on the subsidized loan money students may borrow, but the government pays the interest on such loans while students are enrolled in college and during the first six months thereafter.
Unsubsidized loans are available to all students, regardless of financial need, and are available in far larger amounts. But, students, not the federal government, assume responsibility for the interest payments.
Generally, students who qualify for unsubsidized loans need the maximum they are allowed to borrow. If they require additional funds, unsubsidized loans are also available to them.
Students can apply for the Stafford Loan or the Perkins Loan. Neither has to be repaid while students remain in college.
Parents may also take out PLUS loans for their sons or daughter. PLUS loans offer fairly low interest rates, but require repayment to begin within 30 days.
Even bankruptcy does not free students of the obligation to repay student loans. Lenders will virtually always work with people making a sincere effort to repay their loans, but those who attempt to evade their responsibilities and obligations are subject to wage garnishment and other serious penalties.
Students and their families should not fear student loans. They are a great way to help people get the education they need to have a meaningful career and earn far more than they would with only a high school diploma. But, it pays to shop for and fully understand your options and to avoid borrowing more tahn you really need.
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