Cheap Student Loans
In February of this year, Congress decided to slash $12.7 billion over the next five years from the federal student-loan program AND boost interest rates for the most popular loans.
Just a few weeks earlier, the U.S. Supreme Court gave the government even more power to go after delinquent student loans, even when the borrower is disabled or elderly. It is very clear that students need to limit their student-loan debt.
You may be borrowing too much to begin with if your total loan liability exceeds the salary you expect to make in your first year out of school.
To be honest, Congress has been signaling for sometime now that the days of cheap loans are numbered. This change comes from the government having to pay subsidies to student lenders for many of those consolidated loans, and then missing out on the higher interest rate of loans it generated itself. It came down to subsidizing long-term loans at short-term rates, and they finally said, “NO MORE!” Where Should A Student Look First?
When we talk about cheap student loans, it should be clear we mean the loan should have a lower interest rate. There are many sources available to a student where they can find a loan at a cheap rate.
The best choice is to look for student loans that are sponsored by the State Government, as they provide subsidy on the loans and the student ends up paying less interest on them. Such cheap student loans can come with a relaxed repayment duration and other options as well.
Also, if you are taking a student loan out from a private lender, the rate of interest can be cheaper if you are willing to provide some security to the lender. In most cases a student does not usually own property, so parents might be able to take out the loan for the student by offering the lender security.
With a secured loan amount the lender will be more likely to offer a cheaper rate of interest. If a student has a bad credit report due to late payment or payment defaults on previous loans, the best choice to overcome that problem is to have a co-signer. Your parent, or any person who has a good credit report, can co-sign for a student loan.
Excellent or good credit of the co-signer gives the lender assurance of safe return on the loan and will probably reduce the rate of interest as well. Be sure to compare lenders who claim of providing cheaper rates on student loans for a suitable deal.
The last consideration for a student loan, with somewhat of a better option, would be a home-equity loan. Currently the fixed home-equity rates,which are for people with good credit, are in the 7% to 8% range. You may possibly get a longer payback term with home-equity borrowing than with some other loans, depending, of course, on the amount being borrowed.
Another good point is that interest payments on most government loans are tax-deductible up to $2,500, and you don’t have to itemize. However, interest payments on home-equity loans are deductible on loan amounts up to $100,000, but you also have to be able to itemize to take advantage of this break.
If you are the student, it may be likely that your parents would be willing to help you out in this area if they are home owners.
The best word of advice: plan to work as much as you can before and during your college years to have money saved, and if you do take out a loan, use forethought, moderation, and prudence. That also means looking for cheap meals when eating out!