Student Loan Guide for the Present Credit Crisis Secondary

Student loans have been affected by the global economic downturn over the past year that has led to credit crisis in most countries. This has undoubtedly caused numerous money lenders including banks to become more stringent in their lending policies. In the present credit climate, it is essential for students to plan extra carefully with the help of their parents or a mentor to identify realistic needs and not wants in the borrowing department.

A college education is probably the most important investment one makes in life and the most expensive to boot. Student loans have been growing at an alarming rate as the cost of education even in public universities rises unchecked. With the U.S. government lagging behind, costs have risen even more steeply. In this financial scenario, it is necessary for the student to be aware of what borrowing entails and how the financial aid system works before taking out a loan.

Step one is learning about the different types of loans available to undergraduate students. The government offers federal loans directly to students; banks and money lending institutions offer federal loans guaranteed by the government; private loans from private money lenders and banks without government guarantee on the loans. In a few cases, colleges and universities may offer loans to students. Federal loans are a student’s best bet because the Congress caps the interest at a fixed level.

There are a couple of loans favored by students; one is the Stafford loan that is available to all students irrespective of financial need. The second is the Perkins loan; this loan is given to students with the highest level of financial need. Students from low-income groups are generally given the highest priority. Parents of students are entitled to avail Parental Loans or “PLUS” loans, which are federal loans. Information on these loans is available from the U.S. federal Education Department.

The FAFSA form unfortunately is a long and complicated one, but it has to be filled out. Students may be relieved to learn that the form can be filled out online. Log on and get it over with; as a student you immediately become eligible for a federal loan that can save you thousands of dollars in interest alone. A word of advice, go for the Perkins loan first, if you qualify.

A final closing tip on student loans; be wary of any lender who tries to steer you away from federal loans and into private loans. Talk to the financial aid administrator at the college for advice and guidance.