Student loans are financial aids taken for the purpose of education. They have to be repaid with interest once graduation is completed, and the repayment schedule begins from six months after graduation. Loans are disbursed to either students or their guardians by the federal government, banks, private moneylenders or the school itself. Most loans have 10-year repayment periods and their rates of interest change on the 1st of July every year.

There are different types of loans available to the students - Stafford loans, Perkins loans, PLUS loans and private educational loans.

Stafford loans are disbursed by the federal government. To be eligible, the student must be enrolled in an accredited educational institution at least half-time. The student begins repayment after completing graduation. Stafford loans may be subsidized or unsubsidized. In a subsidized loan, the interest is charged only when the student begins repayment; but in an unsubsidized loan, the interest begins from the day the loan is disbursed. Commencing from July 1, 2005, the rate of interest on a Stafford loan is 5.30% for the repayment period and 4.70% for the grace period.

Perkins loans are disbursed by the school rather than the federal government. Again, a student must be enrolled in an accredited education institution at least half-time to be eligible for it. A Perkins loan charges lower interest rates than a Stafford loan, about 5%.

PLUS loans are loans taken by the parents for their children’s educational needs, if the children are dependent. The student must be enrolled in an accredited educational institution at least half-time to be eligible. Parents are responsible for the repayment of PLUS loans. A Perkins loan is a low interest loan, charging rates of interest from 4.17% (it may go up to 6.10%, depending on the period of repayment).

Private loans are given by banks and private moneylenders. They charge a high rate of interest and there is less flexibility in their repayment methods. The rates of interest differ from one lender to another.

Students can take different types of loans for their education at the same time. Several loans can be consolidated into a single loan with a single repayment plan to avoid confusion. These consolidated loans also help in reduction of interest rates.

In the United States of America, at least 66% of the undergraduate students are using some kind of student loan to complete their educations. In the year 2003-2004, undergraduate students borrowed $19,202 per annum on an average in Stafford and Perkins loans. The average came to $23,814 if PLUS loans are also taken into account. The average figures for graduate students were even higher. Every year there is an estimated 3% increase in the amount of average loans taken.

Student Loan Debt provides detailed information about student loan debt, student loan debt consolidation and more. Student Loan Debt is affiliated with Debt Consolidation Loan Online.

Bookmark to:

Student loan debt is extended to students to help them fund their college education. These loans, which are granted by a range of different sources have to be repaid with interest in the years following graduation.

These days, borrowing for educational purposes is commonplace. In the US, more than two-thirds of undergraduates use some kind of student loan debt to fund their education. And in 2005 the average amount borrowed per student each academic year was over $20000 (Stafford and/or Perkins Loans). This figure rises to $24000 if PLUS loans are taken into account.

Most student loan debt is repaid over 10 years (although it can be extended to 30 years if the debt is consolidated) and the interest rate is set annually on 1st July.

There are four types of student loan debt available to students in the US.

1) Stafford Loans

Also known as federal loans, these are granted by the federal government to students at approved educational establishments. Their course of study must be at least part time and repayment begins once they graduate.

The interest on the loan can take two different forms;

Subsidized: This means that interest on the loan only begins to mount up once repayment has begun. In other words, the student gets an interest free loan until they start to repay it.

Unsubsidized: Interest starts to accrue on the amount borrowed from the moment the money is lent. This option means that the size of the debt becomes larger than under the subsidized option. From July 2005, the interest rate on Stafford Loans is 5.3% during the repayment period.

2) Perkins Loans

Unlike Stafford Loans, Perkins Loans are granted by the education establishment that the student attents. Again, they must be at least a part time student and the institution has to be approved. The main advantage of these loans, it that the interest rate charged is slightly lower than Stafford Loans (around 5%).

3) Private Loans

These are offered by a wide range of banks and other lenders. And as you would imagine, the interest rates are higher (although different lenders charge different amounts) and the repayment schedule is not so generous.

4) PLUS Loans

Unlike the previous options, these loans are taken by parents to help with their child’s education. Again the dependent child has to be enrolled at an approved institution and study at least part time. And this time, it’s the parents who are responsible for repaying this student loan debt.

Students can apply for any of these loans, or even a combination of them, to help fund their studies. If they have a number of these loans, they can consolidate them into a single monthly repayment plan (usually at a lower rate of interest, but over a longer period).

by Stuart Laing

Copyright (c) Get Out Of Debt.

Are you tired of being in debt? Do you resent the large repayments every month? Visit http://www.icanhelpyougetoutofdebt.com for free, impartial debt help information.

This article may be freely distributed as long as the copyright, author’s information and active links are included.

Bookmark to: