Category Archives: Student Loans

Student Loans

The controversy over Federal or Private Loans – Which are really better for students and their families?

May 15, 2012 – 6:27 pm

student loansWith the active debate in Congress on returning the Direct Loan interest rate to 6.80% and the PLUS rate holding at 7.90% and noting that both programs have originating fees, school financial aid professionals are wondering if families will prefer a private loan to a federally sponsored program, particularly a PLUS loan. We have even seen the topic addressed at breakouts in recent Financial Aid conferences.

iHELP’s position has always been for families to first consider all scholarships, grants and Federal loans prior to pursuing a private loan and even then only borrow the amount necessary. However, securing a federally sponsored PLUS loan first is a decision best left up to informed students and families after consulting with their school’s financial aid office.

Consider:
• Interest rates – fixed on PLUS loans at 7.90% and generally variable, but sometimes much lower on private loan programs. Variable rates are near all time lows and may increase over time.
• Credit checks – lower requirements on PLUS loans
• No grace period on PLUS, repayment begins immediately
• Cosigners are generally required on private loans, some parents may prefer to cosign a private loan to taking out a PLUS loan
• Many private loan programs now offer cosigner releases
• FAFSAs are required for all PLUS programs
• 4% Origination fees are charged on PLUS loans, many private loans do not charge Origination Fees.
• Deferment, forbearance and repayment options may be different

There certainly is a great deal to consider as schools guide families. On one thing we all can agree – a well-informed family considering all of their options can be satisfied with their final decision.

Please contact us or your school representative to learn more about the iHELP Private Loan Program and help with any questions you may have on comparisons to federally sponsored programs.

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Student Loans

5 Tips for Choosing the Best Private Student Loan

September 13, 2011 – 5:00 am

student loanIf you’ve already applied for grants, scholarships and federal student loans, but you still have a college financing gap, your next logical step is to apply for a private student loan.

But not all private college loans are created equal. Some may appear to be affordable, publishing a low teaser rate that no one actually qualifies for. Other loans have hidden fees, or a prolonged, complex application process. By the end of it you learn that you have qualified for a high rate – much higher than the teaser rate – but you’re so exhausted by now, you just go ahead and take out the loan.

To help you avoid falling into the teaser rate trap and others, we’ve compiled a few tips to help you avoid the most common pitfalls when choosing a private student loan:

1. Look for a truly affordable loan. You’ll see lots of teaser rates – advertised low rates that almost no one actually qualifies for. Instead, look for a “one low rate for everyone”-type loan, with one rate that anyone who qualifies for the loan pays.

2. Look for an easy, streamlined application process. You don’t have time for a lengthy, time consuming application process, do you? Plus, when you start a long application process, the risk is that by the end of it you’ll be so exhausted, you’ll just take the rate offered to you, even if it’s too high.

3. Insist on a student loan with transparent terms, written in plain English – no hidden fees, no complicated legalese that no one can understand.

4. It’s important to make sure there are no payments while you’re in school, and – ideally- for six months after graduation. You need to be employed in order to start repaying the loan, and this should give you enough time to find a job.

5. Since you’re young and don’t have a credit history yet, you will need a co-signer on your loan. The best loans allow release of the co-signer after a certain number of on- time payments.

If you don’t do your homework before taking a student loan, you could get stuck with an expensive loan with draconian terms. This type of stress is the last thing you need right now. It’s also the last thing you will need after you graduate. You don’t want to start your life saddled with an unnecessarily large debt. So make sure you deal with an honest loan provider –it will save you a lot of money and headaches in the future.

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Student Loans

Pros and Cons of Student Loans

August 18, 2011 – 5:00 am

If you have a college financing gap, you’re probably not in a position to choose whether to take out a student loan or not. You probably have to borrow. But being aware of the pros and cons of student loans will help you be a smart borrower.

The most important thing to remember: Loans – even affordable student loans – cost you money, so only borrow as much as you truly need, and only after you’ve exhausted all your options of getting free money, such as grants and scholarships.

The next step is to apply for Stafford Student Loans. The pros here are obvious – since the funds are guaranteed by the federal government, your credit report is not used in qualifying you for the loan. Federal student loans are fixed rate loans that remain fixed for the entire term of the loan. Rates are generally lower than most other college financing options. And you don’t have to start repaying until 6 months after graduation, giving you time to find a job before you have to start making payments.

The major drawback of federal student loans is the limited loan amounts, that only cover a fraction of college costs. In addition, you will have to file forms with the federal government in order to apply for Stafford loans, and you have to do that for each academic year. You are also limited with what you can use the funds for – Stafford loans can only be used to pay tuition, books, and housing. You can’t use this money to pay other education-related expenses.

In comparison, private student loans are usually easier and quicker to get. You can use the money for a wider range of education-related expenses, such as a laptop, and you don’t have to go through the process of filing forms with the federal government.

However, a credit check is required – and if you don’t have sufficient credit, a co-applicant (usually a parent) may be required on the application. Rates for private student loans are generally higher than federal student loans. It’s a good ideas to shop around though, since some private loans are significantly more affordable than others. You should beware of student loans who advertise “teaser rates” that appear low, but almost no one ever qualifies for.

The best private loans offer you an easy application process, and a repayment plan similar to federal loans, where you don’t have to start repaying until 6 months after graduation.

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Student Loans

College Loans: How to be a Smart Borrower

June 2, 2011 – 7:25 pm

It’s no secret that college costs have skyrocketed over the past decade, increasing way faster than inflation. More and more college students can’t finance college unless they take out a loan. Generally, there’s nothing inherently bad about student loans – they are an investment in your future. But it’s important to be a smart borrower and avoid taking on more debt than you need to.

Here are our best tips for being a smart borrower:

1. Minimize your expenses. Before you even consider borrowing, it’s a good idea to minimize your college expenses as much as you can. You can do this by going to a community college for the first two years; by choosing a public university instead of a high-cost private college; by considering an accelerated degree where you can finish in three years instead of four; and by leading a frugal lifestyle.

2. Increase your income. Take a part-time job, or consider working full time for an employer than offers tuition assistance if you agree to stay on the job for a few years after you graduate.

3. Use savings. A 529 plan if your parents have opened one for you, your own savings from part time work during high school – use as much as you can instead of borrowing. Borrowing is expensive – it’s always best to use existing resources rather than borrow. The only thing you should NOT do, or rather your parents should not do, is tap into their retirement accounts to pay for college. At this stage in their lives, they need to put themselves first.

4. Get help from family members. If your grandparents are in a position to help, don’t be shy about asking them for a low-interest loan.

5. Find free money. Prior to borrowing, exhaust every possible option for scholarships ,grants and financial aid.

6. Take out low-interest loans. If you absolutely have to borrow, take out low interest government loans like the Stafford Loan.

7. Be selective about private student loans. After you’ve exhausted all the other options, if there’s still a college-financing gap, you can take out a low-interest private student loan such as those available through your local bank. Read the fine print carefully. Make sure that the interest rate is indeed low compared with other private college loans; that there are no hidden fees or teaser rates (low advertised rates that no one actually qualifies for); that no payments are required while you are in school; and that there are no prepayment penalties.

The basic rule of student loans is that you should borrow only as much as you need to cover essential costs, such as tuition, books, rent and food. In other words, use your student loan money to finance your education and the expenses directly related to it, not some fantasy college lifestyle that you can’t really afford.

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