With the rising cost of education in the United States, more and more students are relying on loan programs to help pay for their tuition. Federal student loans are created to help students pay for tuition, living expenses, and study materials while attending university. Not only the government can help pay for such expenses, but also the university itself, public and private organizations. The main difference between private and federal loans is that many private loans have a floating interest rate, while government loans have a fixed one. It is often possible to get a scholarship from an organization and even from the government through a university, and then the student will be able to pay for education without having to pay this money back.
There are three types of federal student loans:
- direct subsidized and unsubsidized loans, also known as Stafford loans;
- direct loans;
- federal Perkins loans.
The Stafford loan provides assistance to graduate students in the amount of up to $ 20,500 per year, and students up to $ 12,500 per year, depending on the year of study and university. A subsidized loan differs from an unsubsidized loan in that, under the terms of the latter, interest begins to accumulate from the moment the loan is issued, and under the terms of the subsidized loan, the amount of interest does not increase until the borrower completes his studies.
The direct loan is similar to subsidized and unsubsidized direct loans, but it can be obtained either by a graduate student or by a student preparing for a degree in the liberal profession (doctor, lawyer, manager, etc.). The Direct Loan program offers higher interest rates and helps pay any costs that cannot be covered by Stafford Loans.
The Federal Perkins Loan is available to students at certain universities only. The interest accrued on it is less than that of the first two loans.
Scholarships are only awarded to high performing students. They should have an excellent academic record, take part in extracurricular activities, and have a particular interest in the field in which the scholarship is being sought. The most well-known of the scholarships available to international exchange students and American students is the Fulbright Scholarship. It is enough to pay for a full year of study abroad. Although there are many other scholarships, especially from private organizations, competition must be fierce to obtain them, and therefore most students still rely on federal loans.
Loans to students have analyzed over the past year. By July 1, 2012, the interest rate charged to students on direct subsidized and unsubsidized loans rose from 3.4 % to 6.8 %. In a troubled US labor market, students leave college with incredible debt and no ability to repay loans, leading to an ever-increasing rate of default on these loans.
The controversy over federal student loans is that US government agencies receive about $ 51 billion in student loans; however, in fact, the US government subsidizes higher education rather than gets profits. If the federal government did not issue these loans, then students would have to borrow from the private capital market and pay even higher interest rates, rather than the 6.8% that the government charges.
Politicians at both ends of the American political system have agreed that the burden is too heavy on students during the current economic downturn. The Senate worked out a compromise solution and pledged to tie interest on loans to the situation in the financial market. In theory, this should significantly reduce the interest rate on federal loans – to 3.9% for students and 5.4% for graduate students, making higher education more affordable. In addition, due to the improved economic situation, the bill limits the loan rate for students to 10% in order to protect them from higher interest rates.
Banks for student loans
Only several national banks offer private student loans. These banking institutions are:
- Citizens Bank.
- Wells Fargo.
Banks that offer student loan consolidation
- Payday Loans Illinois;
- Laurel Road;