In simple words, a student loan is a type of loan taken by students to pursue advanced or higher education. When pursuing higher studies, a lot of many expenses come into consideration like tuition fees, cost of books, necessary supplies, and everyday costs. A student loan credit is an advance given with the sole intention of taking care of these expenses while the child concentrates on his/her studies.
A student loan, also known as education loan, differs in various aspects from other types of loans. The major difference is that the loan charges and rate of interest might be significantly lower. Also, the payback period for a student loan starts after the loan taker completes his/her educational degree. Altogether, different nations have different rules associated with student loans. In this post, we are going to share with you certain information and tips which you must consider while opting for a student loan.
What are the Various Types of Student Loans?
In the United States of America, there exist two broad classifications for student loans:
Government Student Loans
As clear from the name, student loans provided by the state itself come into the category of government student loans. They have favorable conditions and rates.
Private Student Loans
As clear from the name, private agencies provide private student loans. They are, usually, not better than the government student loans; however, the promotion for private student loans is quite vigorous.
What is the ideal time to apply for Student Loan?
In the United States of America, the application process for student loans begins no later than the October month of each year. Since the procedure is quite tedious and a lot many formalities require completion, it is ideal to begin ahead of schedule in order to avoid the crowd later.
From October, students largely begin to analyze the various creditors that are ready to provide student loans to them. Students tend to acquire indissolubility letters from these creditors which act as ‘evidence of assets’ to the colleges they wish to apply for higher studies. A student must take care of following parameters into consideration when finalizing a particular creditor.
- Loan Fee
- Components covered
- Handling Fee
- Salary Charge Exclusions
- Advance preparation time
- Prepayment terms
What is the eligibility criterion for Student Loans?
For Government Student Loans (Federal Student Loans)
In order to completely know the basic eligibility criteria for Federal Student Aid (FAFSA) please refer the official link from here.
For Private Student Loans
Though different private creditors have different conditions, the following conditions are essentially the same:
- The borrower must be dependable or should have a valid and financially sound co-signer.
- The basic age of a borrower depends upon various factors and is different in different states. The period of greater part is 21 in Indiana, Mississippi, and New York, 19 in Alabama and Nebraska, and 18 in most different states.
- The borrower and co-signer must fulfill the citizenship conditions.
- The borrower need not record FAFSA when opting for private student loans.
What conditions a co-signer must meet?
A parent or a family companion is free to undersign the credit application with the student. A co-signer must meet the following conditions:
- Have a good salary.
- Must have a decent credit report.
- Must not have any kind of previous defaults on student loans.
- Must be a US Native above 18 years of age.
Adding a co-signer even if you don’t need one is beneficial as your loan fee might considerably decrease by adding a co-signer.
Major categories of student loan
Following are the most widely recognized categories of student loan:
This must be a student’s first decision. They have low loan fee, charges, and favorable conditions. However, a student must apply for the same well in advance as they are in limited supply.
They give more cash than Perkins loan; however, they might have more stringent conditions as compared to Perkins. Stafford Loans also cover more components than Perkins Loan.
These are like standard loans. They need a credit survey and a borrower has to undergo all the processes which a typical loan disbursal process has. Also, advances for students go to their guardians. Therefore, think hard before opting for PLUS loans.
If a borrower has two or more student loans, he/she can combine all of them into a single consolidated loan with an individual set of terms and conditions paying only a single advance. However, different creditors, especially in the case of government and private, have different conditions; therefore, a borrower must make sure that he/she researches well before blending different student loans.
How to Apply Student Loans and Criteria Guide
So, that is it! Now you know the basics of student loans. Make sure you research well before opting for a particular student loan. Have your documents prepared beforehand and make sure that your co-signer is ready to undersign the application with you in case you are opting for a co-signer. Make sure that co-signer has his/her documents ready. It is wise to calculate the costs that will incur to you in the future beforehand before finalizing a particular creditor. In short, please do the necessary homework before going ahead with a student loan. If you have more queries in your mind, please write to us via the comments section provided below.