Student Loans

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Student loans are an excellent source of funding for higher education, in the absence of scholarships and grants. Initially, education loans only covered tuition. The scope of student loans has increased tremendously over time, encompassing accommodation, books and supplies, and even necessary expenses like transportation.[br] 


 

Student loans are an excellent source of funding for higher education, in the absence of scholarships and grants. Initially, education loans only covered tuition. The scope of student loans has increased tremendously over time, encompassing accommodation, books and supplies, and even necessary expenses like transportation.[br] 

Comparing Student Loans: What to Look for?

Interest rates are a basic parameter for comparing student loans. However, simply opting for a loan with the lowest interest rate is not a wise decision. Several other factors must be looked into with respect to student loan interest rates, such as:

  • Is the rate fixed or variable? A variable rate may create high amount of debt obligations in the absence of interest rate caps.

  • How is the interest capitalized? An interest may be capitalized in different timeframes, such as monthly, quarterly or annually. Remember, the more an interest is capitalized, the greater it gets accumulated.

 

Others factors to consider while applying for student loans are:

 

Interest Payment Plans

 

The repayment plans under a federal student loan tend to be more lucrative than those offered by private lenders. Generally, interest on a private student loan starts accruing immediately after it has been approved. Regardless, a good education loan servicing program offers different interest payment options to borrowers, such as:

 

·        Deferment: Interest payments commence only after finishing school.

·        Interest-only payments: Interest payments start immediately after obtaining the loan.

·        Interest and principal payments: Immediate payments are initiated, which covers both interest and the principal balance.[br]

 

Deferment and Forbearance Options

Such alternatives help to manage finance effectively and avoid credit damage, when facing default. Deferment and forbearance helps to discontinue payments for a specific period for reorganization of resources. Under deferment, the interest ceases to accrue during the period of deferment, whereas a borrower has to repay interest for the postponement-period under forbearance. However, forbearance is easier to obtain.  

 

Finally, check for hidden terms and conditions, like additional fees and collateral, while comparing student loans. Such restrictions need to be avoided, as they can be very detrimental to the payment capacity and credit rating.

 

 

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