Going to university today is a massive financial burden. Unlike twenty years ago when a higher education was in reach for most middle class to upper middle class families, it is now becoming an impossibility. Many students are forced to look at state schools only, abandoning dreams of the Ivy League or other big name private institutions.
The solution seems to be taking out student loans offered by top lending providers; Sallie Mae, for example being the most popular one. However, amassing too much debt has crushed the post graduate dreams of many. Instead, of buying a first apartment or house, they are being forced into living back with their parents for years just to pay off student debt.
Why Secured Lending Providers Don’t Want to Lessen College Student Debt
When students are offered their original financial aid package, it may look very enticing. Tops schools are doling out tons of money on the students’ behalf. But take a closer look. Can a student really pay back all that money in the time span listed, and with thousands of dollars of interest accruing in the process? Probably not.
Therefore, it is not in the loan companies’ vested interest to offer loans that will be commensurate with the student’s income after college. After all, it is a business and the more money these companies offer, the more potential they have to thrive financially. Parents and students often make a huge mistake in not thinking ahead and accepting all of the aid offered to them.
Whether Undergraduate or Graduate Student Loans, Listen Up!
Here are steps to analyze education loans and how to make the most informed decision before taking out loans:
- Read carefully about what type of loan the lending provider is offering the student.
- Perkins loans are the best option; however, they can be difficult to come by because a student must prove “exceptional” financial need. Perkins loans do not accrue interest while the student is in school, have a longer grace period after graduation of nine months and an unbeatable interest rate of 5 percent.
- Subsidized Stafford loans come in second with a six month grace period and no interest accrues while enrolled in school as well. Nowadays students can get a 6.8 percent interest rate, not amazing, but generally good.
- Watch out for unsubsidized Stafford loans. Parents and students must recognize the difference, merely a small prefix added to the beginning of the word. Yet that small prefix represents a whole lot of money. Unsubsidized means that when the student takes out the loan, interest accrues automatically, for as many years as the student is enrolled in school and beyond.