American students can use credit funds to pay for their studies. In the United States for such purposes, there are 3 main types of loans:
- student loan
- parent loan
- private loan
To simplify the loan repayment system, a consolidation loan is also provided, which combines all the existing loans of the borrower into one.
Student loans are distinguished by low interest rates and no collateral. The Stafford Loan Federal Student Loan is divided into two main types:
- Federal Family Education Loan Program (FFELP). Such loans are issued by non-state legal entities (banks, savings and credit organizations). The federal government acts as a guarantor for the repayment of these loans.
- Federal Direct Student Loan Program (FDSLP). These loans are managed by Direct Lending School. They are issued by the government directly to students and parents.
In turn, Stafford loans are divided into subsidized, the interest on which is repaid by the government, and non-subsidized (unsubsidized), on which the borrower pays interest on their own. In this case, the student has the opportunity to receive a deferment of payment until the end of his studies. Any student can use a non-subsidiary loan. However, in order to receive a subsidiary loan, a student must document that he really needs material support from the state.
Conditions for students who are parents
Parents-supported students have the opportunity to receive a loan in the following sizes: the first course of study is up to 2625 USD, the second course is 3500 USD, and each subsequent course is 5500 USD. Students who have their own earnings are given the opportunity to receive an additional loan of 4,000 USD in the first two courses and 5,000 USD in subsequent years of study. For graduate students the possibility of an annual loan of $ 18,500 is provided, however, only 8,500 USD of this amount is subject to subsidization.
Interest rate on student loans
The interest rate on student loans is variable. It is calculated by adding the 91-day rate of return on treasury bills (T-bill rate) and 1.7% during the course. At the end of the school, another 0.6% is added to the rate. The interest rate is set annually to the extent not exceeding 8.25%. All lenders give loans at a single rate, but, nevertheless, each of them can individually provide discounts on repayment through the electronic system and installments.
Perkins Loan Concessional Loan
Students and graduate students with a difficult financial situation can get Perkins Loan soft loans. In this case, the creditor is an educational institution that disposes of funds allocated for such purposes from the federal treasury. Since this loan is subsidiary, interest on it is paid by the federal authorities during the term of study. The interest rate on this loan is 5%, the repayment period is 10 years. Also a deferment in repayment of the loan for 9 months. The loan amount is set by the financial assistance department of the educational institution. For students, there are limitations of up to 3,000 USD per course of study, for graduate students – 5,000 USD. The total amount of restrictions for students is 15,000 USD, for graduate students – 30,000 USD. Expanded Lending Option (ELO), institutions in the extended lending program have the right to change the limit of restrictions. In this case, the loan amount is increased by 1000 USD per year, the total amount for students – by 5000 USD, for graduate students – by 10,000 USD. In addition, simplified cancellation conditions are provided for the Perkins loan.
Parents of dependent students have the opportunity to receive a loan for the education of children (Parent Loan). The federal Parent Loan for Undergraduate Student (PLUS) is a parent federal loan that allows you to take up the amount of the cavity that covers the cost of tuition, as opposed to a student loan. PLUS loans can be issued by both private organizations and government agencies. The interest rate on this type of loan is made up of the 52-week rate of return of the treasury bill T-bill rate and 3.1%. It can vary in the range not exceeding the 9% barrier. Loan payments start from the 60th day after receiving the loan, the full repayment period is 10 years. Parents are fully liable for payments.
Private Loan also called Alternative Loan. This type of loan allows you to get the missing amount of money for full payment of tuition, since the loan amount provided by the government program is sometimes not enough. Alternative loans of various types are issued by private legal entities. To receive them, you do not need to fill out a federal form.
This type of loan allows you to combine several loans issued by one lender (for example, student and parent). This greatly simplifies the process of repayment of the loan. The combined loan allows you to reduce the monthly amount of payments due to an increase in the full repayment of the loan. Unlike federal loans, which are issued for 10 years, the alternative ones provide a repayment period of 12 to 30 years. The interest rate is determined as the average value of the loan rates of the pooled loans. The rate is rounded up to 1/8, but does not exceed the 8.25% threshold.
There is also a huge number of grants and scholarships that can be won thanks to their knowledge and skills, if you have confidence in your abilities and a desire to learn.
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