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Financing College With School Loans: Uncle Sam Is Best
by Wade Tobins
Anyone who wants an even remotely secure financial future cannot do without a college diploma. Yet the cost of getting that college diploma can in itself be one of the biggest stumbling blocks to a secure financial future. Even public colleges and universities are rapidly pricing themselves beyond the means of many middle-income families, but for them, a well-though out school loan may be the solution. Properly planned, a school loan need not saddle a student with crippling debt upon graduation.
School loans can be categorized as need-based and non-need based. Need-based loans are for families for whom the cost of higher education will truly present a hardship; they are specifically earmarked to defray some of those costs.
A non-need loan will cove some shortfalls in the education find when a family which can normally pay for college runs into temporary difficulty.
Stafford Loans One of the beat school loan programs on both the graduate and undergraduate levels is the Stafford loan program. Providing unsecured government guaranteed school loans, the Stafford program offers a rate of interest which accumulates at a slower pace as long as the student is enrolled in school. The long-term interest rate will is also fixed for the life of the loan, and the Stafford school loan has a six-month post graduate grace period during which the graduate doe not have to make monthly payments.
PLUS Loans The Parent Loan for Undergraduate Students, or Federal PLUS Program, resembles the Stafford loan program but is offers non-need based school loans and will let parents borrow the entire amount of their child's education costs beyond any other forms of financial aid. These loans have a term of up to ten years, but can be prepaid at any time without penalty. The parents can even start making payments while their child remains in school.
Both Stafford and Plus school loans, however, may still not be enough to cover the full cost of college today. So any difference can be made up with alternative school loans, which are private loans available from many different lenders. As student loans, they carry low interest rates, no application fees, payment grace periods, and a variety of repayment plans. In that they are very similar to the government school loans.
The Home Equity School Loan Option Parents who have exhausted their school loan options can also consider a home equity loan to fund their child's schooling. A home equity loan, however, will not offer the flexible repayment options of a government school loan, and the repayments will have to be made on time or the parents risk foreclosure. A home equity loan should be used to finance college only as a last resort.
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