Student Loans

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Student Loan Programs

The beginning of a college education is an eventful and exciting chapter for America’s youth. Beginning college is also when responsibilities begin to kick in as well. Students must plan ahead how they intend to finance their education during their time at college and after completing their academic careers. Almost seventy percent of college students nationwide take out loans to help finance their education. Like any other loan, student loans must be paid off in a timely manner to avoid hurting personal credit for future investments. The government has various student loan programs to assist students with not only paying for college, but also with paying off these loans after college.

The most common type of student loan is a Stafford loan. These are loans that are available in both subsidized and unsubsidized forms. For the subsidized loan, federal government pays the interest while a student is in school, during grace periods, and deferment periods. Unsubsidized loans on the other hand make the student responsible for paying interest during the mentioned periods. If the interest of the Stafford loan isn’t paid while a student was in school, the loan balance will be higher given that the interest was added to the balance of the loan. This also means that more interest will be paid for the loan and monthly payments will be higher. (Davidoff, 97) Since the Stafford loan is a federal one, they are available to all students as long as they are citizens or permanent residents that are accepted or enrolled in a school at least half time that is part of the Federal Family Education Loan Program. Also, students are eligible for a Stafford loan only after submitting a Free Application for Federal Student Aid- better known as FAFSA. Since loans involve borrowing money, there are terms and agreements that the student must agree to before they can be approved. The Master Promissory Note is a document that lists the terms and conditions and a student’s rights and responsibilities towards the loan. Better known as the MPN, this document is an agreement that the student will carry out his/her responsibility to repay the loan at due time. (fafsa.ed.gov)

A second student loan program that is made available by the government is the federal Perkins loan. With this loan, colleges determine the amount of the loan. Undergraduate students can receive up to four thousand dollars and graduates up to six thousand each semester. The interest rates for the Perkins loan is fixed during the life of the loan that cannot exceed ten years. The Perkins loan does not require interest payments while the student is in school and there is a nine-month grace period instead of the regular six months. The repayment of the Perkins loan is made directly to the college. The eligibility requirements for the Perkins loan are the same as the Stafford loan. As long as a student is enrolled in school, a legal resident of the country, and has completed their FAFSA, then their college may make the Perkins loan available to them. (fafsa.ed.gov)

While some college students finance for their college education independently with their own credit, others are dependent and involve their parents or guardians to take part in their financing process. For dependent students, the government offers the Direct PLUS loan. This federal loan lets parents/guardians of students borrow money after passing a credit check. Once they receive the loan, they are held liable for the loan. The interest rate for PLUS loans is also fixed like the Perkins loan however the rates are higher than Stafford loans. The repayment period for a PLUS loans starts sixty days after the loan money is disbursed. (Davidoff, 102) Although it is relieving to be able to cover the costs for college, keeping up with loan balances and payments is not as enjoyable. There are situations where students often tend to forget that a loan is a responsibility and not free money. They...
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