A college education is one of the most important components of a person’s life and has a deep impact on their future. University tuition of many private higher education colleges now exceeds $50,000 a year. Presently, the rise in college tuition averages 14 percent annually. However, education costs have soared at public universities as well, although not to the extent of their private counterparts.
It is not surprising that students and their families are getting student loans at higher frequencies to pay for college. In 2007, more than $78 billion in federal and private school loans were accessed. Students across the nation depend on college loans to provide for their education, financial aid is important for maintaining continuous schooling.
There are three types of school loans that you should be aware of: direct federal loans, federal loans provided by private lenders which are guaranteed by the national government; and private student loans offered by private loan lenders with no federal government guarantee.
As a student, you should always attempt to access federal student loans first, loans that are either offered by the federal government directly or through a lender; the interest rates on these college loans are capped at a fixed rate by federal law. The university financial aid officials must first steer you towards federal loans.
The universal federal loan is the Stafford loan, available to all college students regardless of financial aid need. Stafford loans are accessible directly from the federal government or through private lenders. In the meantime, Perkins loans are given to students with the greatest financial need.
Additionally, certain college students are awarded federal Pell grants which are based on household income, students from low-income families. Parents of students can also get federal loans under their name, known as Parental Loans for Undergraduate Students or PLUS loans. More information about federal student loans is available on the Department of Education website.
There are federal limits on the amount lent to college students. For it is, a first year student can receive $3,500 in Stafford loans, $4,500 for the second year, after which $5,500 per year is available for a maximum loan amount of $23,000.
Students who require additional funds to complete their college education, private student loans can offer that extra benefit. Private loans truly provide a stop-gap measure when a student isn’t able to obtain federal grants or loan subsidies. Private loans should be used only as supplements to your existing loans. All in all, higher education reform is the need of the hour as escalating costs have made certain, students remain dependent on loans while pursuing higher education.