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The Nuts and Bolts of a Student Loan

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At some point during the progression of most students’ education, either they or their parents will find that it is necessary to take out a student loan. The problem with the whole student loan process for most people; however, is that it can be quite confusing. Below we provide some tips to help you sort through the confusion.

The first aspect regarding loans for education that you should understand is that there are three broad categories. They are:

  • Student loans
  • Private student loans
  • Parent loans

There are two major types of student loans: the Stafford loan and the Perkins loan. One of the major benefits of these types of loans is that they come with low interest rates and do not require collateral or a credit check.

The Stafford Loan

The Stafford loan comes in two different variations; subsidized or unsubsidized. The difference between the two is that with a subsidized loan the government will pay the interest for the loan while the student is in school and with an unsubsidized loan the student is required to pay the interest. The primary requirement for a subsidized Stafford loan is that the student be able to demonstrate financial need. There are no qualification requirements for the unsubsidized Stafford loan. The Perkins Loan

The Perkins loan is available to both graduate and undergraduate students; however the primary difference between a Perkins loan and a Stafford loan is that only students who are able to demonstrate exceptional financial need are eligible to receive a Perkins loan. With a Perkins loan, the funds are made by the educational institution directly to the students from funds provided by the government. All Perkins loans are subsidized; meaning that the student is not required to pay interest while they are in school or during the 9 month grade period following the end of their education. Payments are spread out over a ten year period and the interest rates tend to be quite low.

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