student loans
Apply for Financial Aid NOW: Under the “lender of last resort†provisions of the recently enacted student loan bill, state guaranty agencies or colleges would award loans only after a student eligible for financial aid is denied by at least two lenders. For this reason, it’s critical to apply for your federal student loans now, if you have not already done so. Also on the to-do list for immediate action: Students and their parents should speak directly with their college or university’s financial aid office to learn how this program will work for their school of choice.
Seek PLUS Loans: While interest rates for federally-guaranteed student loans are fixed at 6.8%, interest rates for Parent Loans for Undergrad Students, or PLUS loans, are typically higher, currently 8.5%. Clearly, the attractions of student loans are the low rate and that the parent is not obligated to repay. But the annual borrowing limits on student loans make PLUS loans worth considering, because parents can borrow up to the full cost of college costs and PLUS loans should be more economical than private loans.
Get a Co-Signer: If you need to turn to private lenders for loans, then try to get a co-signer on the loan. Often, students don’t have an established credit history or they have low credit sores, resulting in high interest rates and extra fees. But interest rates on loans where there is a co-signer with good credit can be about six to seven percent, compared to 14 percent when taking out a loan on your own.
Check out Peer-to-Peer Lenders: According to reports, more and more students are turning to peer-to-peer lending services that facilitate loans between unrelated people. In essence, these peer-to-peer services enable a cash-strapped individual to get a loan from another person who is willing to lend out his or her own money. Typically, the rates on these loans can range from 8.5 percent to 10 percent and can be found on Web sites such as Prosper.com and LendingClub.com. The downside here is that the benefits of student loans — deductible interest and deferment of payments until after graduation — do not apply to these loans, so these are typically recommended as a last resort.
Consider a “Safety Schoolâ€: While nobody wants to hear this, the reality for some students is that they simply will not be able to come up with enough loan money to afford the costs of their school of choice. For this reason, start looking into the financial aid packages of loans and grants offered by some of the other, lower-cost schools that accepted you. Options to consider include universities in the state where you are a resident. Also, consider two-year schools, such as community colleges. Keep in mind that you can work toward the goal of transferring to your dream school later. After all, the diploma you hang on the wall will not say “transfer student.”
Student Loan Watcher @ May 8, 2008
Student Loan and Financial Aid Information