When a person decides to go to college, and they do not have adequate funding to do so, they have a couple of options. If they were able to qualify for grants, they can use this free money to pay for their college education. Scholarships are also available, but are sometimes hard to qualify for. In most cases, people will take out student loan.. In this article, we will discuss three of the top student loans that most people take out in order to earn their college degree.
What Type of Student Loans Are Best?
There are many different types of student loans, but federal loans are usually the best way to go. If you were to get a private loan, these usually carry a larger interest rate, and are not as flexible in regard to making payments or refinancing. There are three federal student loans that are usually taken out, and many times people can qualify for them even if they have a poor credit rating. Here’s a quick overview of the top three federal student loans that you should be able to qualify for which include subsidized Stafford loans, unsubsidized Stafford loans, and Perkins loans.
Subsidized Direct Stafford Loans
If you are not able to pay for college, as determined by the information that you put in your FAFSA (Free Application for Federal Student Aid), and you are going to attend college at least half-time, you should be able to qualify for subsidized Stafford loan. These loans are provided by the federal government, and can help you pay for college, even if the college is not a four year institution. You can borrow up to $3500 in your freshman year, $4500 as a sophomore, and up to $5500 for your junior and senior years. There is a 1% upfront fee for each one that you take out, however there is no interest accrued or payments that need to be made while you are in school. The annual percentage rate of interest is 6.8%, which is not a bad deal when compared to private loans and credit cards.
Unsubsidized Direct Stafford Loans
If you require more money to pay for college, you can go over the subsidized Stafford loan maximums that we have just presented. You can borrow an additional $5500 your freshman year, $6500 or sophomore year, and up to $7500 for your junior and senior years. You can actually borrow up to $12,500 in your junior and senior years if you qualify as an independent student. Qualification typically includes being over the age of 23 and having parents that were rejected when they applied for a PLUS loan. The annual percentage rate on these loans is 7.02% plus an additional 1% fee for the amount of the loans.
Finally, there are Perkins loans. You can borrow up to $5500 a year, and you will not be charged any interest, nor will you have to make any payments, as long as you are in school. However, if you drop out, or graduate, six months later you must start making your payments. There are also limitations to this particular type of loan in that some schools may not be eligible to offer a Perkins loan at all.
If attending college is something that you want to do, but you do not have the funds to do so, these three loan options will give you the capital that you need to start earning your college degree. Keep in mind that you will have to repay this money once you graduate, so be very careful when taking out any of these 3 types of student loans for your college education.