Government vs. Private Loans

by John Stevenson on April 9, 2014

There are different ways to fund your college education, including unsecured signature loans and peer to peer lenders. Students can choose from private and state universities, and the latter are usually less expensive. There are different options to consider including financial assistance under government programs and loans from brick-and-mortar banks and non-bank lenders.The best choice is a loan with a fixed interest rate and flexible repayment scheme.

Government vs. Private Loans

pencilsThe borrower’s income is taken into account under government programs . Banks are less accommodating, and many students look for other ways to reduce the costs . With government loans, the interest rate is fixed, and the amount covers your college tuition expenses. There are advantages to loans with a fixed interest rate, one being that borrowers know the amount of their monthly payment.

A fixed rate means that your last and first payment are the same. Banks and credit unions look at factors such as the applicant’s employment history, credit record, debt to income ratio, etc. There are also certain criteria to meet when applying for a federal loan. You must be enrolled in a certificate program, degree, or course at your career school, university, or college. In some cases, you need a cosigner who will guarantee timely repayment. You can ask your parents, family, or friend to cosign the agreement if you do not qualify. There are certain documents to present when applying, including proof of identity, household income, and others.

Parent and State Loans

Parent loans are another option for parents who have dependent students. There are exceptions but unmarried dependents usually qualify. These loans are designed for half- and full-time students enrolled in a certificate or degree program. When applying for a parent loan, consider the loan charges and limit.

Federal loans are one option for full- and part-time students. You can apply for state and private loans, institutional, and consolidation loans. Many colleges and universities offer both loans and scholarships. You may want to contact your financial aid office to check whether loans are available.

Student Grants

There are different types of scholarships, including unique and student specific. Universities and colleges also offer scholarships to students from low income families and often require academic excellence. They are either based on merit or need, and there are different types to choose from. You have plenty of choice, including non-academic and academic scholarships. There are scholarships for adult students and persons with disabilities. Contact your university if you are a returning student. You can use an online calculator to weigh your options.

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