By | May 7, 2018

STUDENT LOANS IN THE USA

Education is becoming more and more expensive with the daily fluctuating economy and the increasing private universities. The students thus aim to save up money for college. Specifically, in the USA, students apply for scholarships, but even these do not prove substantial for long. The next step would be taking student loans. In the USA student loans are easily accessible and can be used for paying tuition, for buying essentials for college (books etc.)

International Student Loans:

“Student Loans” are basically a sum of money given to students to pay off for tuition in college and universities. These loans can be applied for covering the full cost of education. For American citizens, these loans are categorized as Federal Student Loans, however for international students (non-US citizens) who wish to study in the USA, these are categorized as “International Student Loans”.  Loans are given to facilitate the students in their studies during college, however, these loans have to be paid back after one completed his/her education, along with the interest that is added on.

The Basics of student loans:

A lot of loans are actually given by the US government, but unfortunately, these loans are reserved for US citizens. For international students, some banks and financial institutions also give student loans or you can apply for the loans provided by designated universities.

1: Cosigner:

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To apply for a student loan you will have to have a “cosigner”. A cosigner is someone who agrees to pay off your debt or loan if you are unable to make the payment. The cosigner signs your application with you during the application process. However, the cosigner should be eligible. He/she should be a US citizen, have a permanent address in USA and should be of legal age (18 years and above in most states). The cosigner can be a relative, a close friend who can pay off your debt if you are unable to. Most people are reluctant to register as cosigners because they are worried about their own financial needs. In that case, some “no cosigner loans” are also available. However, such loans take many factors into account for example: does the candidate show potential. How soon is the subject to graduate? Etc.

2: Interest Rate

Next thing you should know is the “Interest” that is included in your debt. Interest usually starting to add up as soon as you receive your loan. Interest is the principal sum borrowed usually divided among the number of days of the year or a period of time. (It is often calculated as percentage rate) There are two types of interest rates most commonly used:

  • Prime Interest Rate: This is the rate the loaner charges their customers, usually a commercial bank. It is set by the Federal Reserve.
  • London Inter-Bank Offered Rate (LIBOR) It is the rate estimated by the leading banks in the world which they would charge on loans taken from them. It is based on the British Bankers Association and it may depend on time periods of 24 hours to one year.

The interest rate may depend on a number of factors; your credit rating (private loans take this into account while federal loans may or may not consider them necessary), the lender himself might determine the interest rate, and it may also depend on the creditworthiness of the student.

3: Repaying your Loan:

Now the question of when can you repay your loans. It’s best to pay up your loans as soon as you get the money or else interests can load up leading to debt. Student loan debt in the USA has been estimated to have grown to $1.4 trillion by 2016. Hence, most students live in debt for a while after graduation. The repayment period may be over a monthly period or more depending on your contract. The repayment period stays open for 10 years in private student loans to 25 years. There are some standard repayment plan options i.e.

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  • Full Postponement: Students can postpone or defer payments up to six months after graduation to four years until he is able to pay off his loans
  • Paying Only Interest: Students can pay the interest while in school up to four years (the length for one degree), and can pay the loan up to 45 days after graduation.
  • Immediate Repayment: Students pay off the loan along with the interest immediately after graduation.

Studying in the USA isn’t an easy task. But its benefits exceed the negative. Students interested in studying in the USA should contact their heads of universities they are interested in and should consult with contractors before making a decision. Students should also try to understand each and every term used in the contract before an agreement.

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