Student Loans and Loans Consolidation

The Federal Student loans are authorized in United States under Title IV of Higher Education Act. Both subsidized and unsubsidized loans are under the direct guarantee of US Dept of Education or else by other guaranty agencies. Getting federal student loans is very easy and is available for all students. There is a grace period (mostly of 6 months) and it starts once you have graduated or you become less than a half-time student. Credit score does not matter in this kind of loan and would be available to you when requested. Although the annual limit is something which would be variable depending on your status.

Like getting your high school diploma, getting a student loan could be one of the first steps in your adulthood life. Student loans will help you pay the cost of your professional education with excellence and you would be able to concentrate on your studies harder instead of worrying about financial issues. Students' financial aid programs on governmental level or on a private level offers you different plans so you can manage to pay back your loans at your own convenience. Many student loans consolidation companies also provide you with an option to combine all your loans in a single debt and that definitely helps in getting a lower interest rate and surely helps a lot in saving your finances. You should not confuse student loans with scholarship programs or grants. It's just a financial aid you can avail and can pay back once you have achieved your degree.

Types of Student Loans

· Federal Student Loans

· Private Student Loans

Federal Student Loans

If you are a dependent undergraduate applying for a subsidized loan then the limit for your freshman year would $5,500, $6,500 for sophomore year and $7,500 for junior or senior years. If you are an independent graduate applying for a subsidized loan then for freshman year you will get a limit of $9,500, $10,500 for sophomore year, and $12,500 for junior or senior years. Subsidized loans are offered only to those students who demonstrate the financial need. In this case the interests are paid by the federal government while student can continue his/her education and on graduation the student will be in debt of the exact amount he/she lent. For instance if you take a loan of $8000 then on graduation you would only owe an amount of $8000 without any interests. Unlike unsubsidized loans plans where the student has to pay the interest also. If you take an unsubsidized loan for lets say $10,000 so by the end of your graduation you would owe $10,000(principal amount) + interest of $2000 so all in all you would have to pay $12,000. The grace period remains the same in both kinds and both are guaranteed by the US Government. Mostly students go for the grace period option although if you want then you can also start paying off your debts while you are in college.

Federal student loan for graduate program has higher limits.

PLUS Loans

Unlike federal student loans paid to students, parents can lend a larger sum and thus covering any gap as far as children education is concerned. These loans are commonly known as PLUS Loans (Parent Loans for Undergraduate Students). Parents are responsible for the repayment of this type of loan and students are equally accountable to it too. If the balances are not paid off then the parent's credit rating would suffer. PLUS Loans does not have a grace period and the repayment process starts immediately.

PRIVATE STUDENT LOANS

Some private financing companies or banks offer these kinds of student loans and are not guaranteed by the e US Dept of Education. Their target is to combine the best points of student financial aid programs by the government and offer it to the students so they can complete their education without any interruptions. However, the interest rates are comparatively higher than the federal student loans but there sure is a grace period which is extendable to over a year after graduation. There are further two sub-categories private student loan program is divided into:

· School -Channel

· Direct to Consumer

School-Channel

In this type of a loan program school directly coordinates with financing company and also has lower interest rates. These loans are certified by the school but normally they take much longer than expected to get passed.

Direct to Consumer

In this case the loan is directly paid to the consumer and school has nothing to do with it. This usually has higher interest rates. The only advantage of this sort of student loan program is that you can get accessibility to the loan very quickly, in some cases it just takes a few days to get passed.

Student Loans Consolidation

The worst move you can ever play in your life as far as finances are concerned is getting under pressure of undue debt. This really affects your credit rating and minimizes a lot of government facilities which you can only avail if you are in a good credit standing. Most consolidation companies do not support defaulted loans. You have to initiate the process yourself and try to pay some amount voluntarily on time and clearing off some defaulted amount. Then you can consolidate all your loans into one big loan and pay it off. This has a benefit of comparatively smaller interest rate and you can even choose different modes of repayment and can switch annually too.

Credit rating is something you should be very cautious about. It's the only criteria which counts when it comes for you to buy something like a house or rent a house. It could even decide that whether or not you can rent a car so please make sure to take all necessary measures to avoid any undue debts and the repayment process is on time.