In today’s competitive job market, a college education is an essential requirement for many employers. The boom in demand for college places has seen fees soar over the past few decades.
Inflated college fees present a major hurdle for the average student. Without financial assistance, many young people are left facing the prospect of overwhelming debt.
Overall, there are two options available to those seeking a loan:
1. Federal student loans
2. Private student loans
In this post, we’ll explore the benefits of Federal student loans, and why they’re definitely the superior choice for students!
What is a Federal student loan?
Federal student loans are specific amounts of money lent to students and backed by the Federal government (hence the name). You can get one at any level of education.
It’s important to note that federal student loans are not scholarships or grants. Just like any other loan, you are required to repay them with interest. However, the repayment system works differently than that of a standard loan – which is good news for students!
Why is it better than a private loan?
3. Interest rates:
You’ll remember we’ve mentioned interest rates (the extra amount you repay on top of the actual loan value, in exchange for access to the money).
Interest rates on private loans are set according to a borrower’s credit score. This means the younger and less financially stable you are, the higher the interest rates available will be.
Interest rates on Federal student loans are set by the government. This means regardless of your credit score, you’ll pay the same rates as everybody else – plus, rates for these loans are always lower than average!
4. No co-signer:
Another reason to choose Federal student loans is the fact you won’t need a co-signer.
Private loan applicants with lower credit scores need a co-signer (usually a relative) with a higher score who takes legal responsibility for the loan repayments should things go wrong. Considering that the average student loan is in the tens of thousands, it can be difficult to find someone willing to take that risk.
Federal student loans are open to all students, regardless of income, on fixed interest rates. This eliminates the need for a co-signer, as credit scores are not examined.
5. Delayed Repayment
You might be wondering if the above factors leave low-income students at risk of possible bankruptcy. After all, credit checks exist largely to ensure that borrowers are only offered what they can reasonably afford to pay back.
Federal student loans address this issue through two key methods.
Firstly, they don’t start charging interest on the loan until after you’ve completed your studies – meaning it only starts accruing once you’ve graduated and are able to start your career.
Secondly, they offer a delayed repayment plan. Unlike private loans, where repayments commence as soon as the money is loaned, you wont need to start making payments until after you’ve left college!
6. Loan forgiveness
Perhaps the most important benefit of Federal student loans is Loan Forgiveness.
With a private loan, the outstanding balance must always be repaid, one way or another. If you go bankrupt or, worse, pass away, before it is paid off, the debt will shift to your next of kin.
Federal student loans can be put on hold if you fall into financial difficulty. Not only that, but they often come with an expiry date as well as a legal clause preventing them from being passed on to your family if you are deceased.
Federal student loans are by far the preferable option if you need financial help achieving your academic goals!
If you’re ready to explore your options, why not check out Saving For College, an amazing directory where you can compare top-quality federal loan providers?
Author Bio: Rachael is a content writer at Pearl Lemon Leads who has written on a diversity of topics, from colored diamonds to SEO software. In her spare time, she enjoys singing, sketching, cooking, and video games.