Student Loans | CL Education Group

Oct 28 2017

Federal Government and Private Student Loans

Student loans have helped thousands of students and parents over the past years. They have assisted in paying for tuition fees, student accommodation, textbooks and many other things that are associated with studies and a student’s life in college.

Which institutions provide student loans?

Two types of organizations offer student loans, these are the federal government and organizations that Students in a class disburse private student loans. While students can take many loans from both the government and these private institutions. The conditions are more or less the same. The student will have to start paying back the loan once they start working.

What are the differences between Federal Government and Private student loans? Let us explore them according to CFPB reports that give us some great insight.

Federal Government Student Loans

Benefits

When it comes to federal government loans, there are some distinct differences. Federal government loans can be subsidized in some instances. Further, the loan interest rates are usually fixed and for these loans, any person that is pursuing a career in the public service sector can get an extended repayment period.

Borrower protection

When a student takes out a loan from the federal government, there are many facets of borrow protection that are in place. These will include the discharge of the loan upon permanent disability or death of the borrow and the option to delay or temporarily forgo repayments.

These are some great features of a student loan taken from the federal government.

Private student loans

filling form These are loans that are offered by private financial institutions like credit unions or banks. They may carry a variable interest rate and to qualify for one, you must have a good credit history, a co-signer in many cases will depend on the course of study or school you attend.

Private student loans are structured differently and may not be as flexible as federal government loans and in most cases carry no borrow protection. The benefit, however, is that the loans may be disbursed much sooner than a federal government student loan.

Defaulting on a student loan

The federal government loans carry rather hefty penalties for those who default on student loans. The argument here can be that there are so many benefits and options that there is no need to default. The private loans may carry lesser penalties but in both cases your credit history will be marked, and this will hinder your future applications for any financing requirements.

Student loans are a great facility to help you achieve your educational goals, but you must always ensure you pay them back on time.…

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Jun 12 2016

The Differences Between Federal and Private Student Loans

If you have already decided that a student loan is in your near future, you may be wondering just what the difference is between a federal student loan and a private student loan. While both of these loans will provide you with money to go to school, there are many key differences that you need to take into consideration before you settle on the type you plan to take out. Below, we will go over the differences, which should help you pick the right one much more easily.

Federal Student Loans

When you take a look at federal student loans, there are two main types, which include the federal direct loan program and the federal Perkins loan program. The Perkins loan program is designed for students who have an exceptional financial need and is not as common.

The federal direct loan program is one of the most popular and relied on loan programs for students. The Department of Education is the lender when you take out one of these loans. There are four subcategories of loans, which include the direct subsidized loan, direct unsubsidized loan, direct PLUS loans, and direct consolidation loans.

Subsidized loans are for students who do have a financial need and unsubsidized loans are for students who do not need help financially.

Benefits of the Federal Student Loan Program

Federal student loans are beneficial for students in a variety of ways. For example, you do not have to pay interest on your loans until you graduate or leave school. In some cases, the government will actually pay for the interest on your student loans while you attend school.

Federal student loans also offer flexible repayment plans. You can apply for different programs including the income-based repayment plan. This plan will evaluate how much money you make annually and then base your monthly payments on a percentage of your discretionary income. Sometimes, students have a $0 payment every month.

In addition, loan forgiveness programs do exist and as long as you meet the requirements, your loan will be forgiven.

Lastly, the interest rate on your loan is fixed instead of variable. This means that you will pay the same interest rate throughout the life of your loan and you do not have to worry about it fluctuating.

Private Student Loans

A private student loan is a loan that is offered by a bank or private institution and it is not offered through the federal program. These loans are different than federal loans and offer a variety of different benefits.

Typically, to apply for a private student loan, you need to have good credit, a favorable credit history, a job, and you may need a co-signer. This is often difficult for students to obtain and thus, they cannot always apply for a private loan.

Benefits of Private Student Loans

While these types of loans differ from the federal loan program, there are still some benefits of choosing this option.

For starters, private loans often come with a variable interest rate, which means you may receive a significantly lower interest rate than you would with a federal loan. If you are not too worried about a rate increase, then the variable rate will benefit you in a number of ways and you will not only pay less per month, you will also save thousands of dollars.

Private student loans are also beneficial because you can obtain more than one when needed. A federal student loan is only offered in per year or semester amounts, whereas, you can obtain multiple private loans.

Downsides to Private Student Loans

There are some downsides to private student loans. For example, you do not have the same repayment options and protections that federal student loans offer and you must repay private loans immediately, meaning there is no break in between the time you receive the money and the time you graduate.

Final Thoughts on Federal and Private Student Loans

Federal student loans are a wise choice, but ultimately, it is up to you as to which one you want to apply for. Remember, you do have more protection when you apply for and receive a federal loan.…