Best
Student
Loan
These
Top 5 Strategies Work Extremely Well
Top
5 Best Student Loan Strategies
Opinions vary
on the best student loan but this I know: "the Government always
has the best student loans available and they will subsidize certain
college loans".
The absolute
best student loan is a Perkins student loan but these college
loans are reserved for students with the greatest need. These
loans might not be available to you but you'll never know unless
you try for them.
The second
best student loan is a Stafford Student Loan also issued
by the federal goverment. This loan comes with a little hitch
in the fact they offer two different types: subsidized (government
pays the interest while you are in school) and unsubsidized (you
have to pay the interest).
The
top 5 Strategies that will help you find the best student loan are:
1. determine
how much money you will need to borrow
2. shop around for
loans from various institutions
3. shop for interest rates
4.
loans available at your chosen college
5. repayment
options and strategies
Determine
How Much Money You Will Need
Today's graduating
seniors are averaging just under $20,000 in debt they must pay back
on their college loans. Because tuition is increasing faster
than inflation it's not unreasonable to expect your child to come
out of college with a debt of $25,000.
Over the next
4 years interest rates on college loans will be dropping significantly.
Your strategy should be to pay as much NOW and borrow later
when the interest rates are lower. Currently for this year
the interest rate is 6.8% on unsubsidized loans and 6% on subsidized
loans. The last year of the cycle these rates will be down
to 3.4% for subsidized loans.
If you have
money stashed away for college spend every last cent before you
borrow and when you start repaying your loans you could save on
average $50 or more per month if you borrow at the lowest interest
rate.
Shop
Around and Compare Student Loans at Lending Institutions
Yes, the federal
government sets the rates for Stafford and Perkins loans. However,
they do not set the standard loan fees which should be no more than
2.5% of your student loan. Set up fees are common and the
two you should be aware of are: origination and default fees. Be
wary if you see additional fees involved.
Shop
and Compare Loan Interest Rates Only If.......
The only reason
would need to shop for interest rates is if you are looking for
the best private student loan or you will be consolidating your
student loans. Private
student loans are offered by lending institutions not the federal
government.
Typically
these private loans are usually sought when a student is close to
graduating and they have exhuasted all their federal monies. Make
sure and try to get as close to the federal governments interest
rates and watch out for the fees they will attach to your loans.
Here is a
run down of the interest rates over the next 4 years offered by
the federal government. (subsidized loans)
- 6.0%
for the 2008-09 school year
- 5.6%
for the 2009-10 school year
- 4.5%
for the 2010-11 school year
- 3.4%
for the 2011-12 school year
- returns
back to 6.8% for the 2012-13 school year.
Are
My Loans Available at My Chosen College?
Once you complete
your FAFSA application they will tell you exactly what student loans
you are eligible for. Once you have that report, check with
your college to make sure they have a list of lenders who can get
you that particular loan.
You can also
get a list of lenders for your chosen college by visiting www.finaid.com
or www.efc.org. Many people like to shop online but we are
concerned with student loan scams so we stuck with lenders who are
local and who we trust. Discovery Student Loans is who my
wife is getting her loans from and they offer some great incentives.
Repayment
Options and Strategies
It amazed
me how easy it was for us to get loans. What scares me is
how much it will cost us to repay those darn loans. Many times,
students will consolidate their student loans and it makes sense.
In less than a year we will be consolidating our loans and
these are the repayment options offered.
Standard
repayment option is a 10 year repayment option. With all loans
the shorter the term the faster it is paid off and the less interest
you will pay.
Graduated
payments are based on making smaller payments at the beginning and
larger payments near the middle and end. This will cost you
more money in the long run.
They have
some payment options that are tied to your income. Each year
you will apply for this plan that will determine how much you will
pay based on your current income status. As you can imagine this
type of option will cost even more money over the long haul.
If your student
loans are enormous you can extend your loan for up to 25
years. You can pick one of the first two options above (graduated
or standard).
Strategies
For Repayment
1. Ask
if they have penalties for paying off your loan early. Live
at home or live in a basement. Use the money that would be
earmarked for rent to help pay for your loans. This one strategy
if combined with your normal payment can cut the length of your
payments in half.
2. Direct
Payment Fee Reductions: any time you can knock off even
a quarter of a percent your overall money owed is reduced.
3. Good
Performance Bonus: some lenders will write off a portion
of your origination fee if you are good with your first 24 payments.
4. Possible
interest rate cuts in the area of 2% if you are good with your
first 48 payments.
5. Graduation
bonus: some lenders will reduce your interest rates or
fees if you show proof that you graduated.
6. Believe
it or not, if you are a teacher and are willing to work in less
than favorable climates, you might be able to trade your college
debt by working a certain amount of years in that area. Same
for other professions like nurses.
As you can
see, lenders are willing to work with responsible young adults who
are serious about eliminating their debt. If you don't miss
payments and finish paying off your debt, you will see a very good
credit score the next time you need to borrow money.
Don't be fooled
into thinking that you can eliminate your student loans by filing
for bankruptcy. Recent laws have been written that make it extremely
difficult to get rid of your student loan debt. They will
get their money back from you, one way or another.
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