Trend in Student Loans
Over time, students have been relying on loans to assist them in financing their university bachelor’s degree, and the amount they are receiving lately is becoming steeper due to the increasing rates of interests. For this reason, student need a lot of advice in looking for a reasonable loan that will save him and the parents a great amount of money.
Most universities package their student loans into Stafford loan or a federal parent PLUS loan. The Stafford loan attracts a fixed interest rate of 6.8%; however, there are fees of 1% which pushes the rates to over 7%. The federal parent PLUS loan, on the other hand, has a fixed interest rates of 7.9% interest rates. However, there are upfront charges of 4% on this type of a loan. This makes this type of a loan pricier that other types of loans in institutions where a parent has good credits. In the long run, parents end up paying higher amounts, and the amounts may not even be enough for the student’s tuition payment and survival.
Parents can also opt to take a loan against their whole life insurance though this type of investment is rather poor since the fees are very high. Parents can borrow loans to pay school fees against the balances they have with the insurance companies. The investment under this policy keeps growing though at a lower rate of 4% as compared to the 5-6% of a typical loan. Parents can, therefore, enjoy a net borrowing cost of 1-2%.
Faced with such realities, the best loans options for students are the federal students’ loans, which is available to all students regardless of the amounts their parents make. This loan offers freshmen students at least 5,500 and $7.500 for the upperclassmen. This loan comes with better perks like flexible repayment period and it caps the student’s repayment to 1% of their disposable income per month after graduating from college.