Loans for Education

By: EconomyWatch Content   Date: 4 December 2009

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An education loan has become an imperative, considering the growing cost of education. Federal loans for education, such as Stafford and Perkins loans, are the most popular sources of financial aid for students in the US. These loans are undertaken by the students on their own. The burden of repayment on such loans lies solely with them, unless they introduce a co-signer. Besides, there are several other loans for education, such as the federal PLUS loan intended for parents. 

Special Loans for Education

Loans for education are not restricted to full-time university education. Other common education financial assistance includes:

Private School Loans

 

Enrolling a child in a recognized private school is a distant dream for most parents. The superiority and popularity of private schools for K-12 education is evident from the facts established under the Digest of Education Statistics: 2002, compiled by the US Department of Education:

  • Students from private schools perform better on Standardized Achievement Test (SAT) than their public school counterparts.

  • About 90% private school graduates pursue a college degree, in comparison to 66% of public school graduates.

Despite the supremacy of private school education, the enrollment in such schools is very low compared to public school enrollment. The Council for American Private Education (CAPE) computed that of the total PK-12 enrollment of 6,049,000 in 2009, only 11% was in private schools. The reason for such a wide gap can be attributed to the high costs associated with a private school education.

This bleak scenario has encouraged student loan lenders to provide for private school funding. Such loans are offered to parents on the basis of their credit rating. Some lenders approve loans to financially weak parents, provided they introduce a co-signer or offer collateral.  

Distance Learning Loans

The escalating popularity of distance learning among working professionals, has encouraged several private lenders to fund such courses. An individual, who is a US citizen with a sound credit history, can easily qualify for distance learning loans. Such loans, similar to traditional higher education loans, typically come with the option to defer interest payments until after obtaining a degree.

The interest rates on these special loans for education are generally based on the Prime Rate or LIBOR, plus a margin or the lender, which is based on the borrower’s creditworthiness.  


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