Low Interest Student Loan
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Acquiring a low interest student loan rate enables a borrower to reduce existing payment obligations and benefit from a shorter repayment period. These obvious benefits of a low interest student loan enable a borrower to maintain and improve the overall creditworthiness.[br]
Tips for Obtaining a Low Interest Student Loan
A borrower’s credit rating has significant implications on the interest rate offered on a student loan. This highlights the importance of reviewing the credit report. A student loan applicant must compile all relevant existing loan information, including:
Current interest rates on the open lines of credit
If a student has a poor credit history, s/he may fail to qualify for a private low interest student loan, unless s/he introduces a co-signer. A co-signer is generally a parent, who undertakes the responsibility of repayments if the student defaults.
While one may be able to obtain a private low interest student loan, a federal student loan is the best bet. Federal education loans are offered on the basis of need, and not credit rating. Stafford student loans are the most common low interest student loans backed by the federal government.
A student enrolled in a part-time or full-time program at a recognized institution qualifies for a Stafford student loan, regardless of his/her credit rating. Stafford student loan programs in the US are of two types:[br]
Subsidized: Effective from July 1, 2009, the interest rate on Stafford student loans was 5.6%. Besides the low interest rate, the borrowers of subsidized Stafford loans benefit from interest-payment holidays. While in school, the student is freed from the obligation of interest payments, which continues to accrue, but is borne by the federal government.
Unsubsidized: Interest rate on these loans has remained stable at 6.8% since July 2006. Borrowers of unsubsidized Stafford loans are not awarded the interest payment holiday, and remain liable for interest payments even during schooling. However, the students are allowed to defer the interest payments till after graduation.
The Perkins student loans are another type of common low interest student loans in the market, with rates as low as 5%. Additionally, Perkins loans are subsidized and accompany the largest student loan grace period, which is nine months. However, only students in exceptional financial need qualify for a Perkins student loan.