For many, “student loans” are scary; they are synonymous with multiple years of having no money, sending your entire paycheck to your lender, and working just to repay your college expenses.
Recent changes by the Department of Education to the federal loan programs are designed to benefit all students. These changes allow the Department of Education to maintain more control over federally backed student loans, while Sallie Mae and other lenders will be confined largely to servicing loans held by the government and collecting on defaulted loans.
These changes will eliminate fees paid to private banks acting as intermediaries in providing loans to college students, freeing funds to expand the Pell Grant program and help low income students (allowing a maximum grant of $5,975 by 2017).
Further changes have been made to help borrowers by expanding the repayment options, and allowing some borrowers to qualify for partial loan forgiveness for working in particular jobs. For complete details of Stafford Loan Entrance Counseling, Promissory Note signing, Loan Repayment and Public Service Loan Forgiveness, visit www.studentloans.gov. Parents may also apply for A Parent PLUS loan at this site as well.
As a result of completing the Financial Aid process, a student may also be awarded a Federal Perkins Loan. Very different from a Federal Stafford Loan, this loan has only 1 repayment plan—10 years with monthly minimum payments of $40 and a fixed, 5% interest rate. If this loan is awarded, a student will be sent instructions to do additional Entrance Counseling and sign a second Master Promissory Note. This loan also has some great benefits, including up to 100% loan forgiveness for borrowers working in specific fields (including some teachers, nurses, law enforcement or corrections officers, firefighters, medical technicians, librarians, those working with high-risk children, and others). Visit http://www.campuspartners.com/documents/4884FactSheet.pdf for more information regarding this loan.*
*this program may be experiencing several changes over the next few years.
Families interested in private loans should research their options carefully, and consider which loan is right for them. Information about private loans can be found at www.borrowsmart.com or
www.studentlendinganalytics.com. Each private loan has its own origination fees, interest rates and repayment options.
Student loans are designed to help borrowers reach career goals without paying for their education up-front. And while their on-time repayment is mandatory, lenders can be very helpful during the sometimes-difficult repayment period.
Happy borrowing! Savvy Student :)
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