#federalstudentloansvsprivatestudentloans

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A Comparison of Federal Student Loans Vs. Private Student Loans

What is a Federal Student Loan?

People who choose to enroll in a four-year college or university experience can benefit from a federal student loan. Students from community colleges or career schools could get it as well. A federal student loan is decided based on some financial needs. To qualify, students should meet several requirements and other basic eligibility; also, they need to submit to FAFSA (Free Application for Federal Student Aid). There are also five types of federal student loans which are: Stafford for Dependent Undergraduates, Stafford for Independent Undergraduates, Stafford for Graduates, Parent Plus, and Grad Plus. What is a Private Student Loan? A private student loan is always offered by a bank, online lenders, or a credit union. Students can use such a loan to pay for their college costs. Private loans are perfect for those who are undergraduate and need a co-signer to receive such loans. Moreover, this type of loan could offer one 10-year repayment term, while others might come with a bonus period of 15 years. Federal Student Loans Vs. Private Student Loans Everyone knows the importance of paying for college. Such a fact represents one significant financial priority for many of us, but the ever-growing cost for higher education might reach beyond other people’s financial income. When you don’t have any savings or funds to support the cost of your children’s college education, you might want to take into consideration loan options. Let’s take a look at some facts about federal student and private loans, and draw out some conclusions: You can receive a private loan by merely going to a bank or other lending institutions. Students can choose this option to support their college expenses not covered by a scholarship. Also, private loans are made straight to students, so it will become their financial and legal duty to repay it. Federal student loans, on the other hand, reach other options. They are part of a federal government fund to support students or parents to pay for the amount of money requested for a college education. All you need to do is to complete and submit a free application of student aid and wait to find out if you are qualifying. When requesting a private loan you might encounter a credit check, and if you don’t have one you will need a consigner. For a federal loan, you won’t need to have a credit check. Also, such a loan implies a higher interest rate than federal loans. A private one will come with an average interest rate of 7.99 %, which might vary, while a federal loan will be 4.45 % for undergraduates, and 6 % for graduates, and is also fixed. Moreover, federal loans are sometimes subsidized, while the private ones aren’t. Students will find it quite intriguing the fact that their federal loan might be forgiven if they qualify under some terms and conditions. Private loans, on the other hand, will never offer you such an opportunity. Private loans had always offered somewhat flexibility in terms of repayment. Students have reported this kind of loan to be more comfortable and easier to obtain. Also, these loans are not need-based. Someone might qualify for a higher loan amount if their consigner comes with significant credit. To understand better a private loan is great to keep in mind that it commonly represents a supplement when a federal loan can support the education costs.A federal loan offers more options to give money back after graduation. You can choose a delay or a forbearance option. Moreover, you may even consider an income-driven repayment plan for people who cannot afford high money expenses. Which one is the best option? Firstly, you should consider a federal loan, merely because they are subsidized. Then, of you consider necessary an extra amount of money, you might want to turn to a private loan. Remember, a private loan plan could be used efficiently as a supplement to your needs. Finally, what you should consider is the repayment. This is a significant fact that many students forget. Unless you have a secure and guaranteed source of income, it’s good to get ready for many possibilities. Bottom line You could encounter some issues and not be able to pay your loans after you graduate. However, for such a thing, federal loans offer you protection, being more reliable. Read the full article

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