1. Type of Loans
·
Subsidized Federal Loans - These are the best
type as the government will pay your interest while you are in school.
·
Unsubsidized Federal Loans- This is the next
best loan type. The interest grows while
you are in school but at a rather low fixed rate. It depends what year they are taken out at
for the interest rate but they are usually always below 6.8% and can be as low
as 3.4%.
·
Parent Plus Loans- This is more for the parents
and is still a government loan which means a lower fixed interest rate.
·
Private Loans- This should be the last place to
take a loan as they have higher interest rates than the government loans and
interest will always accrue.
Each
semester the government will limit the amount of federal loans you are capable
of receiving based on your family’s income and the year of school you are
in. In my family, we agreed to our
parents paying for two years of school and we were to pay the rest. In this situation, when it was our turn to
pay, the federal loans wouldn’t quite cover the whole semester. So what we did was take federal loans when
our parents were to pay, and then later use this money in order to fully pay
for school for a semester. Anyway it is
possible to only have federal loans should be done.
2. Amount to accept
If you are forced to
get student loans, take the minimum amount possible. Try to work for your living expenses instead
of settling for the loan to cover everything.
3. Paying them off
This can be a long
and difficult process. I’ll have another
article discussing this in more detail.
I would always recommend paying off the debt as soon as possible. However, if you have a loan under about 5%
fixed rate then using some of the money for retirement savings could be a
better value.
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