DON’T Apply For Student Loans in The US Before Reading This Guide: Importing Details You Didn’t Know!!
According to the US National Centre for Education Statistics, around 5 million students graduate from all streams in the US every year. One of the critical issues in this enormous educational system is student loans.
Do you know which are the best student loans in the us? Can you tell whether federal or private loans are better for students in the US? A lot of students don’t know and hence seek answers to these.
If you are studying here, you may be confused, too. Not only do students know less about the available loan types. They also seem to be ignorant of the loan repayment plans. Let me tell you there are many repayment schemes you still don’t know about.
Well, the sea of oblivion is endless. But you don’t need to be here. At FinanceTeam, one of our prime goals is to spread financial literacy. We urge that readers make more informed financial decisions.
Different types of student loans in the US
There are numerous loan providers in the US. But how do you pick one over the others? That is possible only when you know what the kind of student loans are available here:
Federal loans for the students
Some financial advisors say that students must go for federal loans in the first place. But what are federal loans?
For starters, federal loans are student loans provided by the US Education Dept. Without a doubt, the educational body’s loan mechanism and loan fund are greater than private loan funds.
Over 13 million students get federal loans every year. However, federal loans are not a simple mechanism. At the same time, there is not only one kind of student loan in the US. So, if there are multiple federal loans, what are they?
- Directly subsidized loans
- Direct unsubsidized loans
- Direct PLUS loans
- Direct consolidation loans
Undergraduates can get a maximum of $12500 every year as direct loans. At the same time, graduates can borrow $20,500 from the Direct Plus loan scheme.
| Types of Loans | Distinguishing Features |
|---|---|
| Direct Subsidized loans | Given to undergraduates People with dire financial stress can only apply The government pays the interest on the loan amount |
| Direct Unsubsidized loans | Both graduates and undergraduates can avail of the loan Students are liable to pay interest as soon as they receive the loan You may also choose to pay the interest later |
| Direct Plus loans | PLUS loans help pay off related expenses like hostel bills. Even professional students can apply for the loan scheme |
| Direct Consolidation loans | A single monthly payment No separate interest and principal payback in sequence Diverse repayment plans |
Private student loans in the uS
A lot of students are not eligible for federal student loans. But they need not be worried. They can easily take advantage of private student loans.
You can already fathom that private student loans are costlier than federal ones. Firstly, the interest rates are higher. Secondly, the payment terms are less variable too.
Most importantly, the lenders operate privately. They can decide the interest rates as they please. No federal law governs how much interest they must charge from the students.
I don’t recommend private student loans if you’re not stuck. You may also apply for private student loans if there is an excellent prospect ahead.
Best private student loans in the us
There are many stable and reliable loan vendors in the US. But who to trust? Well, there are specific deciding parameters that you must follow:
| Private Student Loans in the US | Features and Comparative Benefits |
|---|---|
| Sallie Mae | You need a minimum FICO score of 600 to apply. You also need to pay a minimum fixed APR of 3.69%. A standard variable APR rate of 5.54% also applies. It is lower than personal loan interest rates. |
| College Ave | The eligibility criteria stand the same. The minimum variable APR is 5.59%. The rest is the same. |
| Credible | With Credible, you get the lowest variable APR of 5.13%. But the maximum loan you can get is $500,000. |
| SoFi | The minimum required credit score is 640. The minimum fixed APR is 3.99%, and the minimum variable APR is 5.99%. |
| Ascent | You get a maximum loan amount of $200,000 only. Till now, Ascent charges the highest variable APR- 6.01%. However, the upper margin of fixed APR is as low as 14.71% |
| Earnest | Earnest claims you must have a FICO score of 650 to apply. Their fixed APR is relatively high, 16.49%. But they will give you as much of a loan as you need. |
| Citizens | You may get a maximum loan of $350,000 from Citizens. But they charge quite a high variable APR, 5.99%, much higher than secured personal loans. However, auto and loyalty discounts are available for CItizens customers. |
| LendKey | You need to pay a minimum fixed APR of 12.61% with LendKey. |
| Education Loan Finance | The EDLD demands that your credit score be 680 to get a loan from them. However, there is no bar on the amount you can borrow. |
| PNC | PNC lets you borrow only $50,000. But they put you at an advantage by charging the highest variable APR of 8.44% only. No other private body offers such a low APR (highest). |
Reasons Why Federal Student Loans in the US are Better
A comparative graph shows many reasons federal students are better in the US than others (credit card loans, personal loans in the us or private loans). At the same time, it is apparent that federal loan schemes charge much less interest from the students. Wait, there’s more!
You can demand the students to repay only after 6 months since they pass out. However, the same does not apply when they avail themselves of private student loan options. In the same way, students are liable to pay their interest as soon as they get the loan amount in their account.
The same happens with federal loans. However, it is a flexible claim. If you’re not able to pay off interest, don’t worry.
You can do so 6 months after you’ve graduated from college, too. However, the payable amount would increase since the interest will also add to the principal.
Other ancillary benefits you can’t ignore
If you need federal loans, you go straight up and apply. Meanwhile, things like credit checks or cosigners are redundant. However, private bodies won’t process your loans without either.
The government will subsidize your interest amount if you are in real financial distress. Now, you will be left with the principle of paying back only. In most instances, no such schemes are available from private lenders.
In general, the federal schemes are much more considerate. If you have trouble making payments, there will be customized relaxations and buffer time to pay back. However, private loans will not withstand delays and start charging sharp delay fines.
Lastly, there is a lucrative relaxation scheme for working students. Some jobs compensate students if they meet a set of pre-stated criteria. Firstly, their performance matters. Secondly, their attendance and value generation towards the job counts.
Application Procedure
The process of private student loan application varies from one provider to another. However, the same does not apply to the federal loan body. There is a fixed procedure, and a single source authorizes all loans.
Learn how you can apply for federal student loans in the us:
- At first, you need to fill out a FAFSA Form (Free Application for Federal Student Aid)
- Based on your details, you will get an offer letter referencing the viable loan values in quotes.
- The school will help you select the best scheme you can avail yourself of.
- Now it’s time for you to get the loan money.
- But you must do entrance counseling with a loan agent. It is a formal procedure to help you understand your payback obligations.
- The final step is signing a Master Note. You can also perceive it as signing the agreement letter.
- Then, the school will hand over the rest of the liabilities from that point forward.
Apply with Caution
Student loans in the US are the best option for financially challenged students. But they must understand the applicable clauses. In most circumstances, there is no chance that your loan will be written off.
The person who uses it is the last person liable for ensuring the payoff. So, the main stakeholders must understand the nature of loans and what payables they are entitled to.
Don’t apply for more than you need. Secondly, safeguard yourself from the frauds of online lending. And try to clear off the interests promptly. An old yet effective trick is to scale how much you may earn soon. Hence, you will understand if your salary will be enough to afford the payoff.
Best of luck with your loan application process!!
For More Informative Articles Click Below!!
Share this article:
