Best Student Loans
While many colleges offer generous financial aid packages in absolute dollars, undergraduate students are often left to fill a gap between aid and the cost of attendance. That gap is most often bridged with federal loans, and sometimes even private loans.
As the U.S. Department of Education reports, researchers in the area of student loan debt believe that owing a monthly repayment amount that is greater than 12 percent of monthly income is a burden for borrowers. While the class of 2008 graduated into a recession, current and future graduates can benefit from lessons learned as well as a generally more flexible climate of student loan repayment (for example, the emerging popularity of income-driven repayment plans).
As students increasingly see themselves as loan consumers, they are bound to become increasingly savvy about shopping for the optimal education for their loan dollars. To that end, students are well advised to seek out the best student loans.
Top Student Loans
According to Federal Student Aid, the best loans are Direct Subsidized Loans because the interest rate is fixed at a low level. The federal government also pays the interest accruing while a student is in school. Other loans to consider include:
- Federal Perkins Loan: These loans are awarded to students with the highest need and have a fixed interest rate of 5 percent.
- Direct Unsubsidized Loans: These loans are not need-based and have a higher interest rate, fixed at 6.21 percent.
- Federal Parent PLUS Loans: These loans are not need-based, and eligible parents can borrow an amount not to exceed the difference between any financial aid provided and the cost of attendance. The interest rate is fixed at 7.21 percent.
- Private Loans and State Loans: These loans are not need-based and never subsidized. They often carry variable interest rates. Creditworthiness is a factor.
As Investopia reports, there is no conclusive list of the best banks for private student loans, but the following providers are considered among the most reputable:
- Sallie Mae
- Discover Bank
- Wells Fargo
- Citizens Bank
- Sun Trust
Alternative Financing Strategies
According to Forbes, students and parents should consider thinking expansively about borrowing. While the federal student loan and private student loan tracks are available, there may be other sources of private funding worthy of consideration, such as:
- Mortgage and Home Equity Loans: For many parents, their greatest financial asset is their home. Parents interested in this college financing option can talk with a broker about a cash-out refinance of a mortgage, or a remortgaging option, both of which would provide liquid funds to pay for college.
- Cash Value Option on a Life Insurance Policy: Parents who have life insurance policies can consider taking a loan against the cash value part of the policy. The cost of interest and principal repayment will need to be measured against the cost of other options.
- 401K Loans: By law, the maximum loan that can be taken is 50 percent of vested interest, and it must be repaid within five years through payroll debits (and to avoid a possible tax penalty of 10 percent).
At SimpleTuition, our expert staff has created a site full of educational tools and informational articles to help you find, and learn more about, the best student loans and financing options currently available. Keep reading for more information.
Good student loans are a great help for students enrolled in any degree program. They allow students access to sources of funding at a minimal cost. They also offer students the benefit of deferred payments, which means students do not have to worry about paying back the loan during their course of education. Good student loans also help students maintain a decent credit history, which proves beneficial to the applicants in the future.
Which are the best student loans for college?
Federal student loans are considered to be the best options for college students, as they offer the lowest interest rate and have lenient terms and conditions. They allow students the opportunity of deferred payments and a grace period to make sure students get enough time to find a job and start repaying the loan.
What loans are considered top student loans?
Top loans fulfill a student’s financial need for education. However, there are certain factors that make a loan convenient. Federal loans, come with low interest rates and have extremely flexible repayment plans. To apply for one, all you have to do is demonstrate a financial need by filling the FAFSA.
Are cosigners required for the best private student loans?
Yes, most private student loans have a cosigner requirement. Most private loan lenders have this requirement. A cosigner is liable for loan payments in case a student defaults. Other than cosigner requirements, private lenders also require a good credit history. A credit check is performed before approving a loan.
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