LOAN INFORMATION
Educational loans are an investment in oneself for the future. Did you know that a college graduate is projected to earn a minimum of a million dollars above what a person without an education will earn? Potential earnings are certainly an incentive, but even more powerful is the ability to be able to CHOOSE what career path you will utilize to earn a living for yourself. Becoming an educated person puts you in the position of making the choice.
Using a loan is an acceptable form of payment, but we want to give you some practical information and advice.
Borrow only what you need. How much is too much loan? The following website has a debt calculator, and also a calculator designed to project how much of a payment you would be responsible based on the amount of loan you are considering taking.
We would like to make some recommendations on the types of loans to look for and have listed them in the order that we recommend you use them, best interest rate, to most expensive rates.
Perkins Loan – 5% interest, interest is deferred until the time of graduation. This federal loan requires that a FAFSA be filled. Availability is determined by your level of need as defined by the FAFSA, and the availability of fund. Loan cancellation is available for certain types of service; allied health, criminal justice, military service, and education are a few of the types of positions that will qualify for debt cancellation.
Stafford Loans – any student who files a FAFSA and who meets the eligibility requirements will qualify for a federal Stafford loan. The interest rate is set July 1st of each year, and is a fixed rate loan. For 2010-2011 the subsidized rate is 4.5%, the unsubsidized rate is 6.8%. The loans do have an origination fee.
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Parent PLUS Loan – Parent Loan for Undergraduate Study. This is a federally backed, credit based loan program designed to allow the parent of an undergraduate student borrow funds to assist with the student’s educational expense. The loan may be deferred until the time that the student leaves college. There is no penalty for early repayment. The interest rate is currently 8.5% and has an origination fee.
If a borrower is denied a Plus loan, the student then becomes eligible for additional Unsubsidized Stafford loan.
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Alternative Loan – Most lenders sponsor a private, alternative loan. They are credit based loans. The interest rate is usually based on the US T bill or LIBOR, plus the assessment of the applicant’s credit rating. The interest rate will range from a nominal 5% up to in excess of 20%.
These loans are usually sought when the Stafford and Perkins loans do not cover the balance and when taking the PLUS loan is not possible. These are loans of the last resort.
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