Alternative Student Loans

Many students are awarded all types of financial aid and student loans that cover tuition. Unfortunately, college costs can far exceed the price of your class. Private student loans, or alternative loans, can help to bridge the gap between your financial aid, scholarships and living expenses.
Private student loans can be used for just about anything that you need while you are in school. You can use them for a laptop, car, food, and gasoline, whatever you need while you are in school. Many private student loans will allow you to defer payments on the loan until after graduation. This can be a big help when it comes to getting yourself through school.
You will need to do some comparison shopping before you apply for a private student loan. Compare rates, terms, perks and fees before you fill out an application. Some loans may require a hefty origination fee. Some may not offer deferred payments. Some will offer specials circumstance leeway with payments for future times of need. Educate yourself on the types of benefits you can receive from different types of private student loans before you apply.
Some students may get the idea to apply for as many loans as possible instead of doing the legwork and figuring out which private student loan is best before applying. This can be detrimental to your cause. This is because each application you put in reflects as a credit inquiry on your credit report, and can affect your credit rating. Your credit rating will determine whether or not you qualify for those better loans. So, do not jump the gun and just start filling out random applications, shop around and compare lenders before you commit.
Once you have your loan, stick to making payments on time, every time to protect your credit. Paying a loan on time can really help your credit score. Paying more than the minimum is also helpful. If you ever anticipate not being able to make a payment, call your lender right away. Keep in touch with them and make a concerted effort to resolve the situation. This could mean the difference in having a bad hit on your credit or keeping it blemish free. Do not ever blow off a loan payment. Every late payment goes on your credit. It can also cause you to lose good interest rates or other benefits.
Some private student loan lenders offer special reduced rates to customers that make on time payments for an extended period of time. One late payment could count you out of this special deal and could even cause your rate to increase.
Be wise and educate yourself about private student loans before you sign on the dotted line. Make sure that you know exactly how the payment plan works and work towards the goals of better rates and special deals. Keep your payments on time and your credit in check.

About the Author: Evelyn Saunders, a retired teacher, is the editor for student-loans.net, a provider of student loans and information on how to get private student loans as well as consolidation. For more information, please visit http://www.student-loans.net.

Repaying Your Student Loans

You took out the student loan, are going to college and then life changes. So what do you need to know about repaying your student loans? Here is a little information everyone should understand when it comes to federal student loans.

To start, repayment for student loans only occurs after you graduate, leave school, or drop below half-time enrollment. You will then have a short grace period that will be:

* six months for a Federal (FFEL) or Direct Stafford Loan.
* nine months for Federal Perkins Loans

If you have a FFEL or Direct PLUS Loan, you don't have a grace period and repayment generally must begin within 60 days after the loan is fully disbursed.

The upside of FFEL or Direct Loans is that you have a choice of repayment plans. Federal Perkins Loans don't offer this, you generally have up to 10 years to repay, however, your monthly payment will depend on the size of your debt and the length of your repayment period.

If you don't repay your student loans on time or according to the terms of your promissory note, you might go into default, which will affect your credit rating. There is assistance for borrowers having difficulty repaying their education loans, including deferment and forbearance. In certain circumstances, your loan can be discharged/canceled.

One example is if you're a teacher serving in a low-income or subject matter shortage area, it may be possible for you to cancel or defer your student loans.

Just because you go to college and get a degree, doesn’t always mean you’ll have an overabundance of money right away. If you find yourself in financial trouble and have difficulty making your education loan payments, contact the organization that services your loan immediately. Find out if you qualify for a deferment, forbearance, or other form of payment relief. It's important to take action before you are charged late fees. For Federal Perkins Loans, contact your loan servicer or the school that made you the loan. For FFEL Loans, contact the lender or agency that holds your loan.

What is deferment? You can receive a deferment for certain defined periods. A deferment is a temporary suspension of loan payments for specific situations such as reenrollment in school, unemployment, or economic hardship. You don’t have to pay interest on the loan during deferment if you have a subsidized FFEL or Direct Stafford Loan or a Federal Perkins Loan. If you have an unsubsidized FFEL or Direct Stafford Loan, you’re responsible for the interest during deferment. If you don’t pay the interest as it accrues (accumulates), it will be capitalized (added to the loan principal), and the amount you have to pay in the future will be higher.

You have to apply for a deferment to your loan servicer (the organization that handles your loan), and you must continue to make payments until you’ve been notified your deferment has been granted. Otherwise, you could become delinquent or go into default.

For those who are called to active duty during a war or other military operation or national emergency, the new College Cost Reduction and Access Act (CCRAA), enacted on September 27, 2007, modifies the military service deferment for borrowers in the FFEL, Direct Loan and Federal Perkins Loan programs.

This deferment was originally added to the HEA by the Higher Education Reconciliation Act of 2005 (HERA). Under the HERA, the military service deferment had a maximum time limit of three years and was available for loans first disbursed on or after July 1, 2007.

Effective October 1, 2007, the CCRAA eliminated the three-year limit for this deferment and removed the provision that limited the availability of the deferment to loans first disbursed on or after July 1, 2001. Eligible borrowers may now receive the deferment on all outstanding FFEL, Direct Loan and Federal Perkins Loan programs in repayment on October 1, 2007, for all periods of active duty service that include that date or begin on or after that date. A borrower whose deferment eligibility had expired due to the prior three-year limitation and who was still serving on eligible active duty on or after October 1, 2007, may receive the deferment retroactively from the date the prior deferment expired until the end of the borrower’s active duty service.

There are options. If you are concerned about applying for a federal loan due to the need to pay it back, remember there is help out there and people to talk to. Using a student loan for college has more benefits than downfalls, so be sure to do your homework first and then make your decisions.

Evelyn Saunders, a retired teacher, is the editor for student-loans.net, a provider of private student loans and information on student loans and consolidation. For more information, please visit http://www.student-loans.net

Reasons you may not want to save for your children’s college

It goes against everything we are told, to save for our children’s college, starting when they are young. The truth is, it's fiscally irresponsible to spend your retirement money on your children's education.

We all know college can be very, very expensive. With that, we tell ourselves that we'd better start saving if we want our kids to get an education and a good job. Private colleges currently cost more than $25,000 per year, and even in-state public universities cost more than $12,000 per year. Few people can fork over that kind of money without planning ahead.

But are we really in deep trouble if we don't have a college fund set up for our 5-year-old? How should we balance saving for college with other financial goals?

Sometimes, putting money into education funds is not the best use of your money. Here's why:

• You can't get a loan for retirement
• Other financial goals come first. It's heresy to some, but it's true: Your retirement plans are more important than your children's college funds. Your kids can get through college somehow, and you will probably find a way to help them, but it's more important to plan for your retirement. Remember, your kids can get student loans, but there's no such thing as a retirement loan.
• If you have to choose between putting money in the kids' college funds and buying a house, buy the house. You may be able to pay tuition with a home-equity loan when the time comes.
• Education funds are not always the best way


Typical education savings plans may have drawbacks, such as:

• Limited investment options. Many education funds pay only interest; others let you invest in the stock market. You can't use the typical education fund to invest directly in real estate or start a small business, for example. Compare the rate of return you expect with what you could receive in alternate investments.
• Difficulty predicting future tax benefits. Tax rules change, and it's hard to predict future income levels. Sometimes by the time kids reach college age, their parents' income level is too high for certain tax advantages they'd been counting on.
• Financial aid considerations. Students are expected to contribute a higher percentage of their savings to their college education than their parents, so placing money in your child's name may hurt their chances of getting financial aid. You may be better off keeping the money in your name.

If you want your child to appreciate the investment in their education, working with them in helping pay for their own college can have its benefits. Every year a number of freshmen trek off to college on their parents' hard-saved money, only to spend more time the first few semesters partying than studying. Would they crack the books more if they were paying the bill? Even the most responsible kids seem to do better in college when they help pay for it.

Students can start at a community college at relatively low cost. In California, for example, the annual cost for tuition, books and supplies at a community college is about $1,500. After two years, students can transfer to a four-year college and graduate with the same degree as students who started there.

Recent trends, such as taking courses online or getting college credit before graduating from high school, can also help cut the total cost of a degree.

If you decide to set up education funds for your children, ask your tax professional about the options that will give you the most flexibility and the best after-tax return for your situation.

Remember to pay attention to your own overall financial picture first, however. It's a good idea to keep some investments accessible for projects such as paying college tuition, but designated college funds are not the only way to go. Whatever your family's needs may be in the future, the best way to be sure you can meet them is to make sure you are on the right track for all your financial goals.

About the Author: Evelyn Saunders, a retired teacher, is the editor for student-loans.net, a provider of private student loans and information on student loans and consolidation. For more information, please visit http://www.student-loans.net