In the past, most people believed that getting a loan is bad. More so, it is worse when you already have a loan at a young age when you are still studying. But thanks to the books published by Robert Kiyosaki, Warren Buffet, and other financial literacy experts and businessmen, this notion has been redefined and had a more progressive meaning.
Loans may not always be bad. Sometimes, getting a loan could be the smartest option depending on how you will use it. A loan can be bad if you will use for something unproductive but it would be a good one when used for business or something that would generate income.
In relation to this, a college education is considered a privilege by most states and governments of the world, for others, it is considered as one of the most important human rights. But nonetheless, a college education is considered as an investment because individuals, who finished college, may acquire professional knowledge, skills, and attitude necessary for work or putting up a business.
However, not all students are fortunate enough to finance their own college education. Most of them, if not all, apply for a scholarship or have sideline work or both just to fund their studies. But currently, governments and private organizations have been offering financial aids and loans to help students in pursuing a college degree. Sounds good right? Find out more
below the details about different students loans available for college.
Federal Students’ Loan
This type of loan, as the title implies, is granted by the Federal Government. There are three (3) categories to choose from wherein a loan applicant may be qualified.
a. Direct Subsidized Loan - this loan is for students with grave financial need as evaluated by the Federal government. The loan grantee is given the leeway of not paying immediately and not being charged with interest rates until the grace period expires. The grace period covers the entire duration in college, which extends up to the time the student graduated and work.
b. Direct Unsubsidized Loan - in contrast to the first type, this one is the exact opposite. Anyone is qualified because it is not granted based on financial needs. Rather, the school, where the student intends to study, determines how much can be borrowed, which also includes the cost of attending classes and other miscellaneous. Furthermore, interest rates may be charged already even during grace periods.
c. Direct Plus Loan - meanwhile, this loan is completely different from the first two. This is unsubsidized and given to parents of dependent students or students who apply for graduate school studies. Interest rates will be charged after the financial aid has been exhausted for a period of one year.
Likewise, as the name itself, this type of loan can be acquired from private financial institutions. Students may find lists of this financial aids posted in their school bulletins. However, this is completely different when compared to federal loans in many aspects. First, it is credit-based, which means that the loan is granted depending on the applicant’s capacity, and attitude to pay. For students, that implies their parents’ work or source of income. Consequently, interest rates of private loans are not fixed as these are estimated based on past loan transactions like how often to pay and fast were you able to finish paying for the entire loan or how often you missed due dates. In addition, loan applicants are given a lot of options in taking a loan out, whether by a student or a parent. Lastly, there are a lot of payment options to choose from whichever is the most convenient or more advantageous to the payor. A particular payment option may give a payor either fewer interest charges or a lower amount of loan to pay. Below are the descriptions of two types of private loans.
a. Private Student Loans - these are loans granted to students to be taken out provided that the application is duly co-signed by parents or another person who can be considered as “creditworthy.”
b. Parent Loans - in contrast to private student loans, parent loans are granted to be taken out by a parent or any creditworthy individual for the purpose of helping college students in funding their education.
In conclusion, finishing college education at present may not be financially challenging like before. Student loans for college can be considered as another viable option in getting funds to study. However, students must bear in mind that these are still loans which require payment whether during or after the grace period. Hence, a student must be responsible and smart in getting loans.