Student loans for training citizens are very popular in the USA. It is believed that investing in one’s own education allows not only self-improvement for a person, but also allows them to earn more subsequently by getting a higher salary since highly qualified employees are more valued. Such an assessment of specialists is present not only in this country but also in the global market for workers. Many believe that higher education in the United States is better and seek to get it.
What Are Student Loans
In America, educational credits have long become state-owned. US citizens have the opportunity to get an education at any age at the expense of the state and borrowed money. The only difference between the programs is the terms of the credit, the amounts, and the conditions. In the US, best student loans are divided into several types: private, parental, federal, and consolidated. The characteristics of these credits come from their name.
In total, in the United States of America there are two main groups of educational credits:
- Federal student, parent loans;
- Private credits.
A federal loan can be provided directly by a university (Federal Perkins Credit) or an accredited financial institution or a bank (Federal Stafford Credit). The US Government acts as a guarantee against default. During studies, interest on the credit is paid by the government, and upon graduation, a delay of 9 months is given. The most common type of credit is a government loan (Federal Stafford Loan), for which there are two programs:
- the federal program of direct government student credits (FDSLP, FLDP), which is provided to students and their parents directly by the US government ;
- the federal family education credit program (FFELP), in which a student contacts a bank or other credit institution. In this case, the credit is guaranteed by the federal government. The Federal Direct Credit Program (FDSLP and FLDP) includes low student loan interest rates to help pay fees after graduation. The program is funded by public capital from the US Treasury. FDSLP credits are distributed through a channel that starts with the US Department of the Treasury, and from there passes through the US Department of Education to a college or university, and then piles up.
Both federal programs, depending on the financial situation of the borrower, can provide a loan (Stafford Credit or Direct PLUS), subsidized or not subsidized for students, graduate students and for parents of dependent students. Both loans are guaranteed by the US Department of Education and have, according to American students, a fairly modest annual limit.
Under the Higher Education Act, the US Department of Education offers students the following credits: Perkins Credit, Stafford Credit, Plus Credit. The federal Perkins loan is based on the need for student credits provided by the US Department of Education to help American college students finance them after secondary education. It is called after Karl D. Perkins, ex-Kentucky Rep. Perkins loans have a fixed rate of interest of 5% over a 10-year repayment period. The Perkins lending program provides nine months as a grace period. As the Perkins credit is paid by the government, interest on it is not charged until the student starts to repay the credit.
In 1988 the Federal Guaranteed Student Credit Program was renamed after US Senator Robert Stafford. This type of credit is a student credit that grants students the right to assist in funding their education with US government-accredited higher education institutions. If the borrower does not repay the loan to the lender, the US Government guarantees him the return of borrowed funds.
Since loans are guaranteed by the US Government, they are offered at a lower interest rate than if the borrower had the opportunity to get a private loan. On the other hand, strict qualification requirements and borrowing limits on Stafford loans are put forward. To receive a Stafford loan, students must first apply for a FAFSA. Stafford student loans for college are provided directly from the US Department of Education through the Federal Direct Student Loan Program (FDSLP) or through financial intermediaries (such as Sallie Mae or student loan corporations) through the Federal Family Student Loan Program (FFELP). No payments on this loan during the training period are made. Deferral of repayment continues for six months after graduation (grace period). Stafford loans provide both subsidized and non-subsidized loans. Unpaid interest that is deferred until graduation is capitalized (added to the principal). The interest on Stafford loans may vary and is determined by the date on which they were paid.
In the USA, educational loans have long been turned into state loans. US residents are allowed to receive education at any time, regardless of age, at the expense of the state and bank funds. The only difference in the programs comes down to lending periods, amounts and conditions for receiving money.
Parents receive student loans for 10 years with a deferral of contributions of 2 months from the date of receipt. The monthly fee is transferred by the university or financial institution that has passed the accreditation of the university. In the first method of the federal credit, the interest is quite small – up to 5% and a fee for obtaining it is not charged, and the state helps to close them. But in order to get a federal credit, you need to confirm your low financial income, and after completing your studies, the student must close this credit himself, although he has the right to receive a loan extension of 9 months and has to find a position. Private student loans are the difference between the cost of training and the financial assistance received from the state to a student. Consolidated credit is a combination of several types of student loans in the USA.
Choosing The Best Option
You have to choose from ready-made credit offers. Determine how much time you need to pay off the loan. Although a chance to refinance student loans is available, it is better to define the terms in advance. Explore different options when you select the best offer for yourself, do not forget to find out the full cost of the credit with all interest and payments. And carefully read the contracts, there is a lot of important things! This is especially significant if you are dealing with bad credit student loans.
Remember that your debt burden should not exceed 30% of your monthly income, otherwise you risk a lot.
Observing these simple rules, you can successfully use credit products without the risk of falling into a debt hole.
For some people, student credits can create disagreement when you go to college and get the education you are hoping for. The difference will manifest itself if you find yourself unable to pay the high costs that come with higher education. As Americans advise: treat them with respect and do not take them seriously.