Student Loan Terms

If you plan on entering the world of student loans, there are a few terms you should know.

Anticipated Graduation Date - The date you anticipate completing your degree program and exiting school. Applications for student loans contain this date and must be verified by the school.

Capitalization of Interest – The practice of adding interest to the principal amount rather than making interest payments. This option increases the total amount you owe on your student loans and your monthly payments.

Delinquency – Loan payments that are late or missed are considered delinquent. Once a loan is delinquent for more than 180 days, it goes into default. When a loan is delinquent, it appears on your credit report and can limit your ability to obtain credit.

Forbearance – A postponement of loan payments. Sometimes a forbearance is only a reduction of loan payments. Either way, interest continues to accrue during this time frame.

Guarantee Fee – A monetary fee paid to the agency that guarantees a PLUS or Stafford loan issued by a private lender under the Federal Family Education Loan Program (FFELP).

Half-time – Refers to your enrollment status at a school. Students who drop below half-time (which is usually 9 quarter hours or six semester hours per term), enter their grace period on all their student loans.

Origination Fee – A monetary fee that helps defray the government’s costs for subsidizing federal student loans.

Prepayment – Making payments on your student loans ahead of schedule.

Principal – The total balance of you student loans on which interest is charged.

Student Loan Servicing – Lenders, including postsecondary schools, sometimes pay a separate organization to service student loans. The organization is in charge of collecting and processing loan payments.

Tax Offset – If you default on your student loans you are subject to tax offset in which state and federal income tax refunds can be seized and put on the loan.

To learn more about student loan terms, visit ED.gov’s Student Aid section, from the U.S. Department of Education

You are planning to go to college.  How are you going to fund this venture?  I am hoping to help you out with some information about financial aid programs.  For most people this is the first place to start.

 Financial aid refers to monies that are specifically borrowed for a higher education.  While there are many types of financial aid, the most popular are scholarships, grants, and loans.  You should research them all to be fully educated in financial aid programs.

 Financial aid programs come from many different sources, such as federal government, state, and various employers.  Many private sources also provide financial aid.  These sources are agencies, associations and organizations like, civic, religious, philanthropic groups and associations related to one’s field of interest.  To increase your chances of obtaining financial aid you must plan ahead, apply early and read directions carefully.

 Let us start with a scholarship.  A scholarship is a type of gift aid that grants funds for grades, athletics, a unique skill, a special talent, financial needs or even a specific career interest.  Typically, you would not pay back a scholarship, most have requirements and obligations that must be adhered to so the scholarship may continue.

 Next, there is a Grant.  A grant is a type of gift aid that does not need to be paid back.  This is usually based on financial need and is generally provided by the government or the college a student attends.

Of course, there is always a loan.  A loan is a type of self-help aid that lets individuals’ borrower money from many different places, such as government, banks, or other lending institutions.  A loan will always need to be paid back with interest.

It is important to remember that financial aid programs have requirements that must be fulfilled as a condition to receiving the financial aid.  If the requirements cannot be met, financial aid received may convert to a loan.  So, do your homework and pay attention to what you learn.  There are many different financial aid programs to choose from.  Just do the research.

Government Student Loan s

Borrowers who find their government student loan in default have the option of rehabilitating the loan. Through the federal loan rehabilitation program, the borrower and government student loan holder agree to a payment plan that repairs the loan’s status. This plan is spread out across 10 months and includes nine voluntary (and on time) payments.

Loan rehabilitation generally includes a signed agreement between the borrower and the lender specifying the terms of the loan’s repair. Money acquired from the payments is subtracted from the maximum repayment term of the loan.

The overall objective of rehabilitating a government loan is to remove it from default status. Upon successful completion of the program, the national credit bureaus are notified of the change in status. Delinquencies reported prior to the default remain on the borrower’s credit report. The borrower also regains Title IV Loan privileges, including the ability to use any remaining deferment or forbearance time.

Collection costs incurred during the rehabilitation and outstanding interest at the time the loan is rehabilitated is added to the loan’s current outstanding principal balance. In return, this increases the total amount the borrower owes.

Not all rehabilitation programs are the same. Keep in mind the terms of the program rely heavily on the type of government student loan that is in default. Specific information regarding Perkins loans can be obtained directly through the school’s financial aid administrator. For FFEL loans that go through a rehabilitation program, a participating lender must purchase assume and provide loan servicing for the debt.

Once a loan has made it through the rehabilitation process, the borrower is required to continue making on time payments to the lender. Depending on the repayment plan, these payments may be more than the payments due during rehabilitation.

To learn more about the government student loan program and how to rehabilitate a loan, visit the Department of Education website at www.ed.gov

Private School Loans

Attending a private college after high school can cost approximately four times more than it costs to enroll at a public four-year institution. Students, however, increasingly opt for a private education as professional careers become more competitive. Paying for private school is by no means easy, but it is quite possible.

Private school loans can be obtained from both the U.S. Department of Education and a private lender. The government backs both subsidized and unsubsidized loans for students. If you are able to show financial need, you may qualify for a subsidized loan – that is a loan where interest is not charged during deferments and grace periods. Government loans are ideal because they feature low interest rates and are virtually hassle-free. The problem with government loans is they barely pay out enough for students attending public institutions to keep their bills paid. A lot of times, a government loan isn’t enough to address a student’s living expenses.

Enter the private lender. Private school loans can also be taken out through a private agency. Private loans are a little trickier than the government student loan. Lenders don’t care about a person’s “financial need” but credit history and ability to repay are very important. Therefore, in order to be considered for a private loan, the potential borrower must have a solid credit history or a co-signer who does. Private lenders also offer different loan packages and interest rates. Borrowers looking at private student loans through an agency outside the Department of Education should gather information on numerous lenders and compare them to find the best deal.

One way or another, paying for a private college education is doable, it can just take a little more work on the financial end of things. Ideally, students will exhaust their federal loan and grant options before turning to a private lender for financial assistance.

Student Loan Calculator

Private student loans, or alternative loans funded by banks and non-profit organizations, provide another source of financial aid for students. However, what they are really about is availability, flexibility and options.        

Availability

Availability to a Private Student Loan is much more accessible for most people.  Federal financial aid becomes more and more limited with rising tuition costs and inflation. Act Education Loans provide up to $40,000 per year. This is a far more realistic loan limit for many of today’s private colleges.

Flexibility

With a Private Student Loan, there are no threats of deadlines.  With financial aid, there is another deadline to watch, another date to file paperwork by, another meeting or session to attend to qualify for aid. Act Private Student Loans gives you the flexibility to apply for a private loan whenever the need arises during your time as a student.  Is tuition due before the semester starts?  With a Private Student Loan, this is no problem. While federal loans may not disburse until a month into the semester, these private loans can fund in as few as five business days after receiving your completed application.

Options

Scholarships and financial aid can be restrictive.  Scholarship hunting and financial aid can take time to generate results, and there are no guarantees that you will find what you need. Federal financial aid and federal student loans are based largely on demonstrated financial need (except for the Plus Loan), and if you fall in the category of “not poor enough for aid, not rich enough to pay out of pocket”, federal financial aid may be no help at all. Act Alternative Loans do not require lengthy applications or paperwork like scholarships and the FAFSA do.

Lower Payments for Higher Education The Parent Loan for Undergraduate Students (PLUS) is part of the Federal Family Education Loan Program (FFELP). Provided at a low interest rate of 8.5%, a PLUS loan allows you to fund up to 100% of the cost of your student’s education less any financial aid already awarded. It’s a cost-effective alternative to using savings, income, retirement accounts or home equity loans for education costs.

Benefits of a PLUS Loan

Many parents take advantage of the PLUS Loan due to the low interest rates, favorable repayment terms and borrower benefits not available through other types of financing or lenders, including:

• The ability to borrow up to 100% of the cost of college
• Reduce interest rate
• Free, no obligation pre-approval
• Postpone payments up to 3 years in cases of economic hardship while student is in school

Stafford Loans Explained

Students applying for federal financial aid may find themselves confused by the various loan programs available to them. Specifically a student may qualify for a Stafford Federal Family Education Loan (FFEL) or a Direct Loan. Aside from the fact that both are loans, what are the differences in these two programs that both boast “Stafford” in their names? Well here is a quick breakdown to better explain so that you might find the loan that is right for you.

Stafford Direct Loan
The Stafford Direct Loan is also known as a FFEL program. The main difference is instead of utilizing a private lender; the student is financed directly through the U.S. Department of Education and it is based on financial need.

In regards to both loan programs, both graduates and undergraduates can qualify for the Stafford student loans. Interest rates usually run in the five percent range. Each program provides up to at least 10 years for repayment. To apply for Stafford loans, borrowers must fill out a Free Application for Financial Student Aid (FAFSA). The meticulous application determines a student’s eligibility not only for student loans, but federally funded grants as well. Stafford loans can then be awarded to the students in a subsidized or unsubsidized form.

Aside from the Stafford Loan Program, private student loans are also available to students. Parents wanting to assist with their dependent child’s education can consider a federal PLUS loan. Both private student loans and PLUS loans require a solid credit history before funds can be granted.

All student loans, federal or private, require repayment in full plus interest.

• Investigate financial aid and scholarship opportunities. There are many ways to pay for college. In addition to personal savings, like 529 programs, most people pay for college with a mix of low-interest loans, federal and state grants, work-study programs and scholarships. If you’re looking for a federal student loan or other government aid, you must complete the FAFSA—Free Application for Federal Student Aid—every year. Collect information for scholarship opportunities by talking to high school and college advisors.

Tip: To help your college student learn personal finances, try online tools to help your student set a college budget. You’ll find this and other resources at the L4 (U.S. Department of Education, Federal Student Aid division at)

Student Loan Consolidation: Is this necessary for students to use?

When students are finding themselves at the point of having to repay loans for school back to the lenders many are finding it hard to manage a specific amount of money out of their budget to repay loans. Student loan consolidation is an option for students to avoid declaring bankruptcy that can affect their credit as well. Student loan consolidation is now becoming a widely used option that has helped thousands of students to make their payments on time and being consistent and working with the lenders to get the debt down to a manageable level for students.

They pay a certain amount each month and the consolidation company allocates the money to the respective lenders until the debt is paid down in full and student loan consolidation can also help students who have an issue with their credit to get their scores back up because they’re paying on time and not having a point where they miss a few payments.

Consolidation is actually an option that works well for students with college loans since they would pay more if they had to issue checks to each individual student loan company. Having a student loan consolidation option is better than filing for bankruptcy and many will sign on to student loan consolidation companies like Educational Direct to help deal with their loans and to get them paid down and in full with consistent on time payments.

This is actually the best choice for many students since not many utilize student loan consolidation and wind up paying more in interest rates instead of actually paying off the debt in full. Students should research consolidation and see if having a student loan consolidation option will work for them.

Consolidating college student loans actually helps improve your credit history and score and makes getting other financial assistance much easier since it reflects your credit history and can make you more responsible since all you do is pay the minimum on your loans.

Even after you graduate many students don’t make that much money and this is one of the huge issues is so many students are falling behind in their loan payments due to a lot of areas such as losing jobs or having a difficult time finding gainful employment. Student loan consolidation has grown in popularity in the last few years with so many students graduating and having a hard time finding jobs.