When you are headed to college you have a lot of decisions to make. You will need to figure out which school you want, apply for as many scholarships as you can, and of course find alternative college funding just in case the scholarships don’t pan out. When you are looking for student loans you will need to make certain you are getting the best deal out there. The federal student loan or Stafford loan is a government loan. This type of loan has the lowest interest rates and the best repayment options. You see most loans will wait for the repayment until after you have graduated college. Generally with a federal student loan you will wait at least two to six months before the loan enters repayment after graduation. You will also have the option of consolidating all of your federal student loans into one payment with a fixed interest rate.
Most college loans are going to have a high interest rate around 8 to 10%, with the federal student loan you are looking at 2 to 4% maybe 5% as the market changes a little. It will depend on what the banks are doing at the moment and where they need to recoup money. However the federal student loan wants the up coming students that are college age to go on to higher education. That is one of the most important items in congress today- how to make higher education more available. So the federal student loans will always keep the interest rate lower than other college loans.
You also have the option with a federal student loan of obtaining a parent loan or PLUS loan. This loan is called the Parent Loan for Undergraduate Students. It will also have the lower interest rates and it will be taken out in the parents name rather than the student. With federal student loans the student usually takes out the loan with their parents’ as cosigners. The Plus loan is different both in the way it is obtained and the repayment status. The Plus loan is usually given out in two parts according to the college semesters. The tuition is paid first before the student will see any of the loans. Then the student can obtain what is leftover to help pay for books. With a plus loan the student never gets more money than the tuition and cost of books. After 60 days the parents will then have to start repaying the loan. So in most cases the federal student loan is more helpful to the students in interest rates and repayment only. The federal student loan will not be a very large amount. Again it will be for books and tuition, possibly housing as well.
To obtain a federal student loan the parents and student must fill out the FAFSA paperwork each year. This paperwork tells the government how much income the family has and how much they can put towards schooling. It will also tell them the school the person will be attending so they may look at the tuition costs for a fair amount of money to give to the college student.