Personal Finance Tips

So, you are going to college or another institute of higher learning? If you are smart, you have already done your FAFSA or Free Application for Federal Student Aid. There are some sources of aid, such as grants and scholarships, which are a limited resource and the early birds are going to have first bite at those particular worms. The FAFSA is the key to these and the loans which are available under the Federal Government’s programs.

Many of the Federal student loans from the FAFSA or are funded by private companies, such as Sallie Mae (not a government organization at all as many think), Wells Fargo, College Loan Corporation, etc. These are lenders under the FFEL or Federal Family Education Loan program.

Many of you will have no choice as to who your lender is. Your school may work with the Federal Government’s DIRECT program which means the loan is directly from the government. There is no confusion in that case, however you may miss out on some of the bonuses that the private companies working with the FFEL program offer, such as discounted interest rates.

Others will find that their school has a “preferred lender”, and you have no choice in who their student lender is. This may be for the school’s benefit, as their process is streamlined, or maybe there was an incentive from the lender for the school using only that company.

The rest of you are going to be bombarded with choices. In most cases you will end up phoning the numbers in the mailers and speaking to a student loan officer.

I used to work for one of the bigger student loan companies. When you try to get a FAFSA based loan for college and university, you will be pitched in a very particular way.

I am going to let you in on how they sell these loans to you.

The education loan consolidation and Plus / Stafford loan pitches that you will find at the consumer resource FAFSA Loan will let you be prepared to deal on equal terms with the education financial aid industry.

There is nothing underhanded, but you do want to be prepared so that you make the decision which is best for you, not for the student loan officer. These people are paid on a commission basis.

PLUS Loans and Stafford Loans

On the PLUS Loan and Stafford Loan Script page you will find an explanation of the pitch I used for Federal education loans for when the student was still at school. Two of the things that were drummed into us was to convey a sense of urgency, and also that this was a FEDERAL GOVERNMENT program. We weren’t told to make anyone think that we were the government, but if they did, it certainly couldn’t hurt.

Note that Stafford loans are sometimes referred to as an unsubsidized student loan or a subsidized student loan.

Consolidation Loans

Once you have finished school you may want to consolidate your student loans. At this point you may have the opportunity to contact the lending companies again. And don’t worry, they will be contacting you, too!

On the Consolidating FAFSA Loans page you will find the a summary of the script that a lender will use to convince you to consolidate. Again the modus operandi was to convey a sense of urgency, and also that this was a FEDERAL GOVERNMENT program.

Remember that there are deadlines for these loans but they are usually based on publicly known dates such as school dates and interest rate changes by the Federal Government. If a lender tries to tell you to get your application in within three weeks or “your file will be closed”, don’t worry. The “file” can be opened again real easy!

All the best in your education, and don’t hesitate to contact us if you have any questions or comments.

One of Uncle Sam’s greatest gifts to the American student is the Federal student loan program which makes it possible for millions of young Americans to pursue higher education. But Federal student loans may not always cover tuition and expenses 100%. That’s why so many parents and students turn to private student loans to fill in the gap.

Private student loans — not just for tuition!

All the talk these days is about the higher costs of college tuition. But what often gets overlooked are all of the other college expenses that can make going to college more financially crushing.

However, that may not be a problem for you since most private loans can cover virtually all college expenses, including: o Room and board o Off-campus housing o Registration fees o Text books o Laptop/Internet access o Travel expenses to get to and from classes

How can you qualify for a private loan?

Because private loans are made by private institutions such as a bank or other private lending institution, your ability to get a loan will be based on merit, specifically good credit, essentially, a high enough credit score. The availability of a co-signer with good credit is even better from the lender’s perspective because taking into account a co-signer’s good credit, your combined probability of repaying the loan is higher. So, the lender can be more likely to approve you for a private loan.

If you think about it, most consumer loans require collateral, such as a house or a car. If a borrower doesn’t repay the loan, then lender can repossess your property, so it can sell it to recoup the money it had loaned out.

In the case of education loans, there really is no collateral; i.e., how can a lender repossess your education? It can’t. That’s why lenders rely on a good credit record, since that is a strong indicator that you and/or your co-signer have a proven track record of repaying on your credit cards or other loans in a timely and responsible manner.

Co-signers with good credit can help you qualify for a private loan, lower your borrowing costs and improve your own credit score!

Because private loans are based on merit, the rate you receive is based on your credit history and income. If you don’t have one or the other or both, having a creditworthy co-signer can be invaluable. In fact, a co-signer with good credit can help you obtain a private loan with a lower interest rate, saving you a ton of money over the life of the loan.

Another added benefit of a creditworthy co-signer is “guilt by association but in a good way.” This means that the timely, responsible repayment of your private loan under a co-signer arrangement will be a positive way to build up your own credit record.

Take advantage of private loan benefits

Of course the primary purpose of obtaining a student loan is to help you obtain a sound education so you can realize your career aspirations. And using credit wisely is important. That’s why you’re encouraged to seek out as much Federal student aid, grants and scholarships first before applying for a private loan.

Private loan application process — get pre-approved in minutes if you qualify!

However, once you determine that a private student loan can be a viable alternative funding source to cover your education finance gap, you could be pre-approved for a private loan within minutes of applying! Many times the application process is very simple and can, with most lenders, even be handled over the phone or online.

Longer pre-payment terms and no pre-payment penalties can help you better manage your cash flow after college

When it comes to paying back your private loans, many lenders give you up to 20 or 25 years to do so. The absence of pre-payment penalties means that as long as you make your minimum monthly payment, you can pay off your loans as fast or as slow as you want within your repayment term.

Interest rate discounts can help lower your cost of private loan borrowing even more!

Many private loan lenders would like to have your business. So be sure to shop around, and make sure to ask each lender about these and other private loan “borrower benefits” such as:

o An interest rate discount for automatic payment from a savings or checking account

o An interest rate discount for simply making on-time payments.

o Little or no origination fees, if you or your co-signer has good credit

Who is eligible for a Private Loan?

Keep in mind that each private loan lender has certain eligibility requirements. For most private student loans, you must meet the following criteria:

- Must be creditworthy applicant or have a creditworthy co-borrower

- Must be a U.S. citizen, U.S. permanent resident, or international student with a qualified U.S. citizen or U.S. Permanent Resident co-signer

- Must be within age of majority by your state of residence (typically 18 years of age)

- May be a full time, half time, or less than half time (including continuing education) student

Types of Private loans

What’s great about private loans is that many lenders have a variety of loans that is tailored to fit your specific course of study. The loan name, minimum and maximum loan amounts, and the loan repayment terms are all tailored around the typical needs of the course of study you have chosen to pursue.

Undergraduate Private Loans – Just as the name implies, apply for an undergraduate private loan if you’re a college undergraduate, or are attending a career, technical, and trade school in the U.S., at least half-time. Continuing Education Private Loans – This private loan is right for you if you are completing a degree, a certification program or taking classes to further your career or for personal development. A continuing education private loan is available to you if you attend an eligible school at least part-time (less than half-time). Graduate/Professional Private loan – If you have decided to pursue an advanced degree at participating colleges and universities, and planning to attend at least half-time, then this private loan can get you the funds you need to achieve your educational goals. K-12 Education Private loan – If you are a parents or other adult sponsor (relative or friend) of children who attend participating non-public elementary schools, many lenders provide these loans to help cover the expenses. Most lenders provide K-12 education private loans for students who attend private, religious, preparatory, and military or special education schools.

Need more money to pay for college? Private loans are here for you!

Now that you’ve learned about an alternative way to pay for your college-related expenses, don’t let anything hold you back from pursuing the dreams of success you want. A great education is a wonderful thing and nothing should ever stand in your way of achieving your goals.

As you start or continue your education, the availability of private loans offers you an option to fund your education when you don’t know where else to turn for the money you need.

If you are planning on doing a distance learning degree, you probably have started a search for online education loans. After all, unless you have a rich uncle or you are rich yourself, you are going to need student financial aid. This is nothing to ashamed about, over 60% of students who attend colleges across the USA have accessed some form of education financial aid.

But if you are searching for “online education loans” – you may want to do yourself a favor and extend your search a little. This is because education financial aid is available to students of distance education colleges and traditional campus-based colleges. Individual online schools may offer financial assistance to their students but there are alot of other student aid options available to students who want to study online.

For example, federal loans and grants are available to students who attend accredited distance learning universities. “Accredited” is the key word here because federal student loans and grants are not available to students who attend unaccredited institutions. There are a lot of bogus online colleges (aka diploma mills) that are more than happy to sell you fake degrees.

Diploma mills are a total waste of time and money. You might find it next to impossible to get that dream job if you only have your fake diploma to impress your prospective employer with. Individual states also offer grants and other financial aid to students attending accredited education institutions.

Private grants and scholarships are also given to students pursuing certain degree programs – even if such programs are pursued online. Bottom line, don’t limit your search for student financial aid to “online education loans”. It makes better sense to do a search for “student financial aid.” If you do that – you’ll see not only loans, but grants and scholarships that you can access.

Education loan consolidation can be tricky business. There are hundreds, if not thousands, of lenders just waiting to offer you a deal on your education loan consolidation. You need to be able to tell the difference between legitimate lenders and companies that are out to make a fast buck on a novice borrower.

A legitimate lender will not rush you into making a decision or try to make you believe that there is any deadline for consolidating your education loans. They will answer any questions you might have and explain their education loan consolidation program in its entirety.

Interest Rate

The interest on consolidation loans is based as much on the federal Treasury’s loan standard as your federal student loans. The rate is weighted and rounded up to the nearest eighth of a percentage point. The interest rate is capped at 8.25% which means that you will never have an interest rate that is higher than this, but you can definitely have one that is considerably lower.

Balance vs. Term

You should already be aware of the balance for your total education loan consolidation. The amount of the loan will determine just how long you will be given to repay the full amount. On an extended repayment term, the lengths are as follows:

Under $7,500 – 10 years $7,500 to $10,000 – 12 years $10,000 to $20,000 – 15 years $20,000 to $40,000 – 20 years $40,000 to $60,000 – 25 years Over $60,000 – 30 years
About Consolidation

Most education loan consolidation lenders will not consolidate loans with a total balance of under $7,500. The Direct loan program is the most popular one that handles loans with a balance lower than $7,500. You can consolidate more than once as long as you have a new loan added to the consolidated loans. Once an interest rate is fixed it does not change so you have to stick with it for the full loan term. Lenders for federal education loan consolidation usually offer deferment and forbearance options. You can consolidate your loans while you are enrolled in a program and delay payments until after you have completed the program. Most lenders offer borrower benefit programs that decrease the amount of interest you have to pay for choosing to enroll in a direct debit program or making a certain number of consecutive payments.