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To secure a bright future, many students strive to acquire a degree in one course or the other. While this is a great plan, the biggest challenge that both local and international students are facing is the issue of funds.
Acquiring a higher education in the USA costs quite a lot, due to expenses such as tuition, textbook costs, living expenses, and so on.
This is where student loans come in to help. There are two types of student loans -federal and private- which comes with their features and benefits.
While federal loans are the most common type of student loan also the most beneficial, not everyone qualifies for it. If you find yourself in this category, private loans are the alternative option for you.
Numerous private lenders in the USA offer various student loan packages and it is up to you to select the best option for you.
The best way to do this is to familiarize yourself with the details of student loans and the Top Lenders of Student Loans in the USA.
This article will interest you more about student loans.
What is a Student Loan?
This is a type of loan borrowed by students to cater for their post-secondary education or higher education-related costs. The loan usually covers tuition fees, textbooks, and home and board. When you take a student loan while in school, depending on the lender, you are not required to start making payments until six months after graduation.
There are two main types of student loans – Federal student loans and Private student loans.
How to apply for a Student Loan
1. When applying for a student loan, the first step you need to take is to fill out a Free Application for Federal Student Aid (FAFSA) to find out of you are eligible for a federal student loan. This form can either be filled online or at the office of the Federal Student Aid website.
2. Using the information that you gave while filling out your FAFSA, the financial aid offices at your college will decide how much financial aid to give to you.
3. If you are not eligible for a federal student loan or you qualified but the money isn’t sufficient to cover all your educational expenses, you can apply to get a loan from a private lender, which can be either a bank, a credit union, or an online lender.
4. The final step is to pick a school and make a research on how much you’ll need to attend it.
Types of Student Loans
There are two major types of student loans namely:
- Federal student loans; and
- Private student loans.
Federal Student Loans
This is the most common type of student loan due to the numerous advantages that it presents compared to private student loans. Federal student loans are usually granted by the US government.
To apply for it, you will have to fill out a Free Application for Federal Student Aid (FAFSA). The amount that is often granted usually depends on the cost of attending the student’s school of choice.
Also, a credit check is not often required. Some of the advantages of federal student loans over private student loans is that they usually come with low-interest rates and flexible repayment plans.
Types of Federal Student Loans
1. Direct Subsidized loans: Direct Subsidized loans are loans granted to undergraduate students based on their financial needs. What makes this type of student loan unique is that the interest on the loan is usually subsidized by the government while a student in school and they won’t have to only have to start making payments six months after graduation.
2. Direct Unsubsidized Loans: These student loans are granted to both graduates and undergraduates, regardless of their financial need. Unlike Direct subsidized loans, the student is responsible for paying the whole interest on the loan both while they are in school and after they graduate.
3. Direct PLUS Loans: These federal student loans are granted to graduates and parents of undergraduate students, regardless of their financial need. Part of its great features is that it can be used to cover some education expenses that are not covered by other financial aid which a student might have. Also, the borrower is absolutely responsible for paying the whole interest on the loan.
4. Direct Consolidation Loans: This is a way out for borrowers with multiple student loans. It is usually taken to combine numerous federal loans that a student may have borrowed in the past into a single loan with a fixed interest rate. The advantage of this is that it makes it easy for students to repay their loans, as instead of making multiple monthly payments, they only have to make one payment.
Private Student loans
If you don’t qualify for a federal student loan, you can always apply for a private loan and use it to cater for your edication expenses. These loans can be gotten from private lenders such as banks, credit unions, and other financial institutions. The money gotten here can be used for a wide range of school expenses such as tuition, books, transportation, and other related expenses. One of the features that makes private loans different from federal loans is that it requires a good credit history, and if you credit score is poor, you will need a co-signer.
Furthermore, the interest rates on private loans are usually higher compared to federal loans and the repayment plans also differ. Another feature that makes it different from federal student loan is that you don’t have the grace of suspending repayment until six months after graduation, instead, you are expected to start repaying your debt while you’re still in school.
Differences between a federal student loan and a private student loan
1. Federal student loans are granted by the government while private loans are gotten from private lenders such as banks and credit unions.
2. Federal loans are considered as a first option while private loans are usually taken when students need more money to cover the expenses that the federal loan didn’t cover.
3. Some federal loans don’t require good credit while all private loans do.
4. The interest rate charged on federal loans is relatively lower compared to private loans.
5. Federal student loans often have a fixed interest rate while the interest rates on private loans are either fixed or variable.
6. The interest on some federal loans are subsidized while private loans don’t offer this benefit at all.
7. You can consolidate federal loans but you can’t do that with private loans.
8. Federal loans offer loan forgiveness programs while private loans don’t.
Student Loans for International Students
When shopping for a student loan, it is always advisable to start with federal student loans, as they offer certain benefits that you can’t get from private loans. Unfortunately, it is almost impossible for international students to get these loans, as there are certain strict requirements that they might not be able to meet.
To confirm if you qualify for any type of federal student loan, consult with your school’s financial aid office.
However, International students who don’t qualify for federal loans can always opt for private loans. They can borrow money from a private lender and use it to cater for their education costs.
Most lenders often require an international student to apply with a cosigner who is a US citizen. The cosigner is just as responsible for the loan. However, some private loans such as MPOWER Financing, ProdigyFinance, and Stilt don’t require a cosigner.
If your request for a loan is approved, the money will probably be sent directly to your school’s financial aid office. The office will then use those funds for your tuition and other school-related fees.
Even though each private lender has its eligibility requirements, some common ones among them are:
- You need to be registered in a qualifying college or university.
- You need to provide proof of enrollment in the school.
- You need to provide a valid visa.
- You also need to provide a current high school or undergraduate degree transcript.
See Top Lenders of Student Loans in the USA
Federal loans are always the best option when sourcing for student loans but when one doesn’t qualify for them, the alternative is private loans. Although private loans don’t offer some of the benefits that federal loans do, some private lenders offer some loan packages that are beneficial compared to others.
Below are some of the top lenders of student loans in the USA who offer the best loan deals.
1. Earnest: This is a top private lender that offer loans with low intetest rates and the best repayment terms in the market. Earnest offers different repayment plans from which you can pick the one that is most convenient for you. Also, if you’re the type that makes your monthly payments on time, Earnest allows you to skip a payment once in a year and pay it at a later date.
- It offers loans for part-time students
- Flexible repayment terms
- It is not available to students living in Nevada.
- It does not offer co-signer release.
- You must have a minimum of three years of credit history.
- You must earn a minimum of $35,000 in income every year.
- You must have a credit score of at least 650.
- You must be a U.S citizen or at least a permanent resident.
2. Credible: This is a great student loan market place where you can shop for loans with the best interest rates and the ones that you qualify for.
It offers numerous options.
You will get loans with the best rates.
You may not meet the eligibility requirements of some lenders.
- You must have a credit score of at least 640.
- You must be U.S. citizen or at least a permanent resident.
3. SoFi: This is another fantastic lender that offers some special benefits for parents. As a parent, if you take out a loan for your child’s education, SoFi offers the chance for your child to refinance the loan in their own name in the future, if they want to assume responsibility for it. Also, it offers loan forgiveness if the borrower dies.
- Loan forgiveness.
- Flexible repayment terms.
- Children can refinance parent’s student loans.
You need to have a good credit to qualify.
It is not accessible to international students.
- You need s credit score of at least 650.
- You must be a U.S citizen.
4. Iowa Student Loan (ISL) Education Lending: This is a nonprofit lender that offers low-interest loans to students. It offers different loan options with flexible repayment terms.
- You won’t always need a co-signer to get a loan.
- It offers loans with low-interest rates.
- It is not available in all states.
- You need a credit score of at least 660.
- You must be a U.S. citizen or at least a permanent resident.
5. Ascent: This lender offers loans that require a co-signer and ones that don’t. It offers loans with low-interest rates and great repayment plans.
- It offers a long grace period and forbearance.
- It offers loans with low-interest rates.
- Higher rates for marginal borrowers
- Not everyone can get a loan without a cosigner.
- It is accessible to U.S. citizens, permanent residents, international students, and DACA recipients.
6. Education Loan Finance (ELFI): This is a compassionate lender that offers nice interest rates on all its loans. Customer satisfaction is at the heart of all its services, which is what makes this lender a great option for students in need of a student loan.
It offers low rates on its loans.
It offers flexible repayment terms.
- It doesn’t offer co-signer release.
- It is not accessible to international or DACA students
- You must be a U.S citizen or a permanent resident.
- You must have a credit score of at least 680.
- You must have a minimum of 36 months of credit history.
Getting a higher education often costs a lot of money, which you as a student may not have readily available to you. Student loans are and will always be a great financial solution, as long as you can find lenders with loan packages that fit into your plan.
To get the best loan deals ensure to pick from the above list of Top Lenders of Student Loans in the USA.