Depressed at not being able to afford quality education? It’s time to get a student loan. Student loans are completely different from grants and scholarships. In the case of a scholarship, the student gets monetary favors on the basis of certain achievements, academic or otherwise, whereas grants also are a sort of monetary help extended to budding students, but they are not merit-based.

A student loan is the monetary debt given to students for a cost, usually in the form of an interest, to help facilitate their education process. The payment is generally done after graduation which also means that these loans stay with the students for a long time; hence informed and well researched choices have to be made today in order to avoid any financial crisis later on in life.

Preliminary Considerations

• The initial and most critical step is to accurately prepare an estimated budget. Think about the various expenditure you are likely to incur pertaining to tuition fees, housing, food, medical expenses, etc. Take into consideration any scholarship that you might have earned and speak to your family, if they’d be able to contribute towards your education. After you have the precise estimate in hand, calculate the amount you can pay through personal income and savings. Further deduct this amount from the estimate. Experts state that borrowing 125% of this net figure would suffice.
• Learn about the various loan options and determine which suits you the best. Student loans are provided both by the Government and by private lenders. After selecting the one best suited for your needs, conduct thorough research about the interest rates, upper limit, credibility of the source, etc. You should be completely familiar with the all the norms and clauses.
• When aiming to get a student loan, the majority of students often opt for federal student loans as they are often subsidized, which means that while you are in school, the government would take care of paying the loan interest on your behalf. Federal loans also have lower rates of interest and adaptable repayment terms.

Federal loans are of various types. A Stafford loan is one such classification, and are lent out after taking into account the Annual Gross Income of the student’s family. Stafford loans which could be either subsidized or unsubsidized are of two broad types, FFELP - financed through either a credit union or a bank and Direct loans - provided by the Government itself.

Perkins Loan is a highly sought-after loan as there is a chance for the student to lock up a 5% rate of interest. In case of a Perkins loan, it is the school that pays the interest. It is a need-based loan and the student’s financial needs are considered before this loan is given. The term of repayment is 10 years.

Not only the students but also their parents can apply for loans for their child’s education. PLUS loans are a kind of federal loan that permits the parent to obtain an education loan. However, there is an absence of a grace period and repayment starts instantly.

A lot of times, students resort to Federal Student Loan Consolidation as it helps greatly in managing their student loan debt. This program helps to consolidate all outstanding eligible federal loans like Perkins, Stafford et al, into a single unit. This reduces the burden of multiple payments as students would then have to make only one student loan payment per month.

Sometimes, even after taking a Federal Student Loan, it might still fall short. In such cases, resorting to private loans may become inevitable. Given chiefly on the basis of the credit score of the student, private loans are much more expensive.

• Seek advice on the selected student loans. Visit the financial aid office of the school to know about how to get a student loan. Do your own research on the internet, ask ex students who have already taken the loan. Search for non-profit organizations that assist students in seeking higher educations by providing loans at much lower interest rates.

After you have decided upon the type of loan to apply for and have conducted comprehensive research on the same, the process of applying for the loan begins.

To apply for loans keep in mind the following details:

• While applying for Federal Loan (both subsidized and unsubsidized) the FAFSA or Federal Government’s Free Application for Federal Student Aid has to be dully filled.
• Arrange for all the information that has to be entered in the form like the lender code, the school code, personal documents, financial documents, your parent’s recent most tax returns, etc.
• In case of applying for private loans, a photocopy of the credit score has to be kept ready.

After you get a student loan, you have to be very careful with the documents. Keep them organized and handy. Note down the PIN that is generated on completion of the FAFSA, this pin has to be kept private. Documents like promissory notes, loan contracts, tax statements and other important and confidential documents should all be properly conserved.

Read up on the changes in the loan industry. Keep yourself up to date with the current news, changes in rate of interest and every piece of information that can affect your loan and in any way.

Usually the loan amount is paid back after graduation except in the case of PLUS loans where the parents have to start repayment almost instantly. On completing the education one had obtained the loan for, the lenders usually start asking the students to commence repayment. They remain impassive about whether the student has been able to bag a job yet or not.

Usually, a particular grace period is awarded but if there is a persistent delay in making payments, the interest would keep on mounting. You can opt for deferment of payment which would buy you time to repay the amount.

In the case of subsidized Federal loans, there will be no accruing of interest. In instances where the student cannot pay back the amount, the co-signer who had lent his credibility would be asked to repay the loan amount.