A student loan is a financial aid that enables students to pursue higher studies. Students can avail of student loans from various banks and financial institutions after applying. Student loans can help you pay off your college expenses without affecting your future earnings potential. So, why do you need to apply for student loans? To get an idea, the article lists some of the factors that will help you decide on a student loan:
The interest rate is undoubtedly one of the most important factors to consider when choosing a student loan. The lower the interest rate, the less you will pay in interest over time and vice versa. The average student loan interest rate is around 7% right now (and can vary depending on the type of loan).
“The government sets the interest on federal student loans. If you are in school now, the government has set the federal student loan interest rate for undergraduates at 3.73% for the 2021-22 school year. The direct unsubsidized loan rate for graduate or professional students is 5.28%, explains Lantern by SoFi experts.
- Repayment terms should be aligned with your income and career goals. The repayment term of the student loan is the period of time over which you will pay back the loan. It can differ for each lender, but it’s generally between 10 and 30 years.
- Repayment terms should be flexible enough to allow you to switch careers. If your career plans change, some lenders offer a one-time option for you to change course without penalty and without affecting your credit score.
- Repayment terms shouldn’t be more than what you can afford. You don’t want a student loan payment to put undue stress on your budget and future financial goals, such as buying a house or saving up for retirement.
Fees are the second most important thing to consider when choosing a student loan. Fees vary depending on the lender and can include origination, application, late payment, and penalty fees. You will want to look for a lender that does not charge you any of these fees.
It is a common myth that only people who graduate from college or university are eligible for student loans. However, this is not true; you can still get a loan even if you are an undergraduate or postgraduate student. The eligibility criteria may vary from lender to lender, but most lenders require that the applicant is under 25 years of age and a full-time student with a GPA above 3.5 (on a 4-point scale).
In case your GPA is below 3.5, there are many options available with which you might still be able to take out a loan:
- Some lenders offer alternative products such as parent PLUS loans, which allow parents to borrow on behalf of their children;
- Students can also consider private loans, which they can apply for directly without going through the government channels;
- People who have already borrowed through the federal government may also find themselves eligible for additional funds by consolidating multiple federal loans into one single payment plan with better interest rates and flexible repayment options.
While choosing a student loan, you must consider the interest rates, repayment terms and other criteria you need. If you have questions about student loan services, feel free to contact us.