Taking out a student loan entails paying interest every month. By selecting a loan with a low-interest rate, you can save money. In addition, a low-interest rate implies you’ll have to pay back less money in the long term.
Your best option is a discounted loan. The federal government covers your interest rates while in college with these loans.
The various types of student loans to consider are listed below. However, remember that not all students are eligible for all loans. And you can get student loan forgiveness if you decide and choose carefully.
Let’s begin.
Various Public Student Loans To Consider Before College
1. Perkins Loans
Colleges may use federal funds to give these loans to students with the greatest financial need. The fixed interest rate of 5 percent is modest, and you don’t have to make any student loan payments while in school. A total of $27,500 can be borrowed.
Pros
- The interest rate is fixed at five percent.
- You will not be charged interest until you graduate.
- Undergraduate and graduate students can take advantage of this opportunity.
- There are no start-up costs.
- After graduation, there is a nine-month grace period for repayment.
- Work as a teacher in foreign languages, math, science, special education, police officer, nurse, or firefighter. You may be eligible for loan forgiveness of up to 100 percent.
Cons
- Only students in desperate financial need are eligible.
- The Perkins Program is not available to all schools.
- The amount received is determined by Perkins Loan money available at your school. However, you may not get the funds if it runs out.
2. Private Student Loans
Banks, institutions, private groups, and state government agencies often don’t provide subsidized or need-based student loans. Instead, they may demand good credit, which often necessitates the cosigning of a loan by an adult with good credit.
These private student loans have higher interest rates than federal loans, which may climb over time. In addition, these loans may have less advantageous terms than those offered by the federal government.
3. Subsidized Direct Loans
The federal government takes care of your interest while in school on these federal loans, which have a fixed interest rate. You must demonstrate a financial need.
Pros
- Credit history isn’t a consideration.
- After graduation, there is a six-month grace period for repayment.
- In 2017-2018, the interest rate for undergraduate students was set at 4.45 percent.
- You will not be charged interest until you graduate.
Cons
- Students must show that they are in financial need.
- Borrowing amounts are restricted ($3,500-$5,500 annually).
- Graduate students are not eligible.
- For each payout, a 0.69% origination fee is deducted.
4. Unsubsidized Direct Loans
The fixed interest rate on these federal student loans is 3.73 percent. However, they allow you to borrow more money than you could with only a Direct Subsidized Loan.
You can pay the interest while in college or add it to the total amount of your loan. You’ll wind up paying more money in the long run if you choose the second choice.
Pros
- You are not required to show financial need.
- In 2017-2018, the fixed interest rate for undergraduates was 4.45 percent, and it is six percent for graduate students.
- Credit history isn’t a consideration.
Cons
- Throughout the loan time, you are liable for paying interest.
- For each payout, a 0.69 percent origination fee is deducted.
- Interest will accumulate and be added to the original loan amount if you don’t pay interest during school, grace periods, deferment, or forbearance periods.
5. Direct Consolidation Loans
All your federal loans can be consolidated into a single monthly payment with direct consolidation loans.
Pros
- The interest rate is fixed and based on the average of the consolidated interest rates.
- Allow borrowers to consolidate all qualifying federal student loans into a single loan serviced by the same company.
- Bowers may make cheaper monthly payments, but they may wind up paying more interest over the life of the loan.
Cons
- Increasing the length of your payments can potentially boost the amount of interest you pay in the long run.
- Consolidation may result in the loss of benefits afforded by the original loans, such as lower interest rates, debt cancellation, or principal rebates.
- PLUS Consolidation of loans to parents is not possible.
Final Thoughts
To pay tuition and other relevant college fees, federal student loans and other financial assistance should be your primary options.
Private student loans are the next best option if you have maxed your government financial aid and federal student loans.