STUDENT LOANS » College Financing

College is expensive, but for many it is part of their American dream. Not only are good grades and decent SAT scores needed to matriculate, money is needed to help finance the process. Aside from scrimping, scraping, financial aid and scholarship money guardians and students can help finance the rest of the expenses with either federal loans or private loans.

Federal loans are low, fixed-rate loans backed by the Federal Government. There are several options available. PLUS loans where parents manage the debt; the Stafford Loan that is the mostly widely used loan in the federal portfolio; and Perkins Loans for extremely low-income students. Except for the latter, the major qualification for the first two loans is a good credit history. The money is loaned either directly from the government or through one of their approved lenders such as Sallie Mae. Private loans are offered directly from lenders to borrowers through private institutions.

Some of the major differences between the two (using Stafford Loans managed by Sallie Mae and general private loan information) are:

• Both require a decent credit history, however private lenders have stricter criteria
• Federal Loan applicants Free Application for Federal Student Aid (FAFSA) while the loan applications of the private lenders must be completed
• Federal loans are only offered to US Citizens or permanent residents
• Federal loans are granted to those full- or half-time undergraduate or graduate student while personal loans are granted for students enrolled at least half-time at a 4- or 5-year college or university (approved by the U.S Education Dept)
• The interest rates for Federal Loans are set by a federal formula, private loan rates are set by the lender
• Federal loans have a 3% origination plus a 1% Guarantee fee (for 4%), private loans have a repayment fee (3%) may apply to some credit tiers
• The loan amounts are significantly lower for Federal Loans as they are capped by Congress, but private loans can be granted in the amount of $100,000
• Federal loans have a standard 10 year repayment schedule while private loans have a 15 year schedule

When comparing the two options, make sure to get printed lender information for both, so all the differences can be compared side by side.

The pursuit of a higher education it has always been important to both the US Government and its citizens. Knowing that the cost of this benefit is steep, the federal government has developed different financing plans to help people pay for their continuing matriculation, one program for assistance is a Graduate PLUS Loan.

The "PLUS" in the loan titles name stands for Parent Loans for Undergraduate Students. Similar to a Parent PLUS Loan in many aspects, the Grad PLUS Loan is specifically designed for graduate students. The main difference is of course the curriculum for which the loan will cover and that graduate students are directly responsible for these loans (as opposed to the undergrad program which is a parent or guardian held loan).

The Graduate PLUS Loan is a low interest, federally backed student loan guaranteed by the U.S. Government. It is like a private student loan, but with the benefit of having a fixed interest rate (currently at 8.5%) and federal guarantee. The payments can be deferred while the student is in school and the loan will cover all the expenses of the education including tuition, room and board, supplies, lab expenses, and travel. The Grad Plus Loans are granted solely on a credit history basis and if one's credit is good there are no cosigners required. The total amount of the loan is based on the cost of the education minus any aid already received.

Those wanting a Grad PLUS Loan to help pay for their tuition, need to fill out applications and submit them properly, additional paperwork may be required. As a federal program, it is also that applicants complete a FAFSA (Free Application for Financial Student Aid). The FAFSA may need to be "certified" (approved) by the college or university's financial aid office.

Students interested in a Grad PLUS Loan must have a history of applying for their annual loan maximum eligibility under the Federal Subsidized and Unsubsidized Stafford Loan Program before applying for a Graduate/Professional PLUS loan.

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