Student Loans
There are not many areas of credit that are as complicated as student loans are. This is because there are many types of student loans, lots of terms, complicated conditions and fine print. In order to make the best long-term choice for your educational funding, you are going to need to study those options.
One of the most common loans, that hundreds of thousands of students use, is a Stafford loan. This is a way that you can partially finance your education and it does have some positive aspects. Some of these benefits include:
There is no pre-payment penalty with a Stafford loan. This means that you can pay off the remaining balance any time that you want to do so.
There is no credit check either, so almost anyone can get this type of a loan.
While you are taking courses, no payment is required as long as you maintain at least part-time status. Repayment actually begins six months after you leave school.
Some limits do exist as to how much money you can borrow in one year. Also, while the rates look attractive, they do contain additional charges that make the cost of borrowing higher. In fact, a 2% Federal ‘origination fee’ and a 1% Federal default fee can be applied.
It may also sound attractive to be able to repay this loan over the course of a 10-year period. However, the amount of interest you will accumulate will be over 39% of the original amount. Therefore, this really is not a cheap option.
With all of this information in mind, you may find it worthwhile to investigate other alternatives. An option that you may want to look into is combining grants, scholarships and conventional loans that are re-paid via part-time work while in school.
One of the best options is to open a savings plan early on in a child’s lifetime. The risk here is that inflation, financial crises and other such unpredictable elements will cause the money that you have invested in a savings plan to be worth very little by the time that it is actually needed. Some other things to consider are tax-free municipal bonds and inflation-adjusted hedge funds.
Unfortunately, there is no easy way in which you can finance the high cost of education today. However, if you spend the time to check out all of your options, you will save yourself time and a headache in the long run.