How to Effectively Compare Student Loan Programs
For most incoming college students, financial assistance is a must. If you’re heading off to school, you need to make sure you have all the facts on the loan programs available to you. The average cost of the first year of college is nearly $10,000, not including room and board. With that in mind, here are a few things to consider with respect to financial assistance.
First of all, you need to remember that the federal government is a great source of help. Many college students go straight to private lenders without exploring federal loans, but that’s a big mistake. Interest rates on private loans are typically variable, which means they can change with the market.
It’s important to note that the federal government offers a maximum amount of $31,000 in loans to dependent undergrads for four-year degree programs and $57,500 for independent undergrads. There are strict limits to keep in mind, though. Many dependent freshmen can borrow only $5,500 for their first years in school, for example. This is where private and alternative loans come into play because they can fill in monetary gaps.
Both federal and private loans include fees, although there are caps on the former. Direct federal loans have a cap at 1.07 percent for undergrads and 4.29 percent for graduate and professional degree students. Private lenders set their own rates and might include fees for disbursement, insurance, deferment, and other elements.
When you have a good idea of the total amount you need to borrow, the fees associated with a given loan, and the terms of repayment, you can start comparing options in earnest. Just don’t forget to look into the borrower protections. All federal loans give you the ability to postpone payments during times of hardship, but private lenders aren’t legally required to offer those types of protections.
Make sure you know what to consider when weighing your financial assistance options. Choosing the right loan makes a huge difference in the quality of your life as a student and long after college.
