There will come a time where you will be faced with many student loan choices regarding financing your education. Maybe that time has come already. Here are some few helpful tips on how to choose a good student loan package:

1) The first thing you need to know is that there are three types of student loans available out there:

  • Federal Student Loans made to students directly

These loans are available to college and university students and are used to supplement individual and family resources, and the financial aid package offered by your college. They may be subsidized by the U.S. Government, or may be unsubsidized depending on the student’s financial need. Subsidized and unsubsidized student loans are pretty similar in nature. The main difference is that for subsidized loans, the government pays the interest rates of the loan while the student is still in school. You can only borrow a certain amount of Federal Student Loans. In January 2006, it was $2,800 per year for freshman undergraduate students and increases each year up to $5,500 per year for junior and senior undergraduate students.

Student Advantage: No payments until 6 months after graduation.

  • Federal Student Loans made to parents

They are called PLUS loans (Parent Loans for Undergraduate Students). Usually, parents are able to borrow much more than students. However, there is no grace period whatsoever. Payments start immediately.

Student Advantage: Your parents are responsible for the loan, not YOU.

  • Private Student Loans made to students or parents

These are education loans made to students and parents by private finance companies: banks, specialized education financial lenders. They generally offer higher loan limits than government loans, ensuring the student is not left with a budget gap.

Student Advantage: No payments until 6 months after graduation, sometimes for as long as 12 months.

2) The next thing you need to consider is how much you can spend on your own. Only get a student loan if you have no other choice. It should always be your last resort, not your first one. It might seem cool to borrow now and pay later but it generally isn’t. So make sure you really need the student loan.

3) Now if you decide that you need that student loan, take only as much as you need and never borrow more than you need. It might only seem like a couple of hundred bucks right now but it will quickly rise to thousands of dollars in student loans in a few years.

4) Whatever you borrow, always make a point of paying back a little of it every month, especially when you are in school. Paying back your student loan while you have no interest running on will pay off in the future.

Now go get that Student Loan!

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