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Students, Parents Should Research Student Loans

July 25, 2014
By J.W. JOHNSON JR. - City Editor , The Intelligencer / Wheeling News-Register

One of the biggest decisions a person will make in their life is where to go to college.

Still, after months of research, campus visits and deciding where to go, the biggest question still remains: How to pay for four - or more - years of higher education.

While some scholarships and other aid from the school itself will help in deferring the cost, student loans are the most likely route many students will take to pay for their education. The most notable option is the Free Application for Federal Student Aid, which is how students apply for and are awarded federal loans based on a number of factors.

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Photo by J.W. Johnson Jr.
Students and their parents should research and ask as many questions as possible when filing for student loans.

When applying for loans via FAFSA, students and their parents will need information such as social security numbers of both the student and parents; tax information of both earned and taxed income; and additional financial information, including assets and cash holdings. This information determines the amount of money a family can contribute toward a student's education, and how large or small the amount of financial aid award will be.

Depending on one's status and ability to pay on their own, different types of loans are available with varying repayment requirements. According to FAFSA information, types of financial aid include:

Additionally, some students can be enrolled in a work study program, in which they will work for the university or college part time. The college pays for half of those wages, while the government picks up the rest.

The advantage of using federal loans is the low repayment rate and deferment and forgiveness programs available to borrowers.

The public service loan forgiveness program is an option those working in public service jobs may use to have parts of their loans forgiven. According to federal student aid information, a borrower working in an approved public service job must also make 120 full payments on time to have the remainder of their Perkins Loans forgiven.

Students having a hard time paying their monthly loans may also consolidate their federal loans, but there are requirements to doing so. While consolidation can reduce several loans to one lump payment per month, it also can extend the life of the loans, resulting in more payments and increased interest.

Borrowers also have the option of deferment and forbearance in some situations. In deferment, the amount of the loan and interest is delayed due to a number of criteria, including financial hardship, military service and continued education. Deferment can take place for up to three years.

If a person is not eligible for deferment, a forbearance can be granted. This is similar to deferment, though interest continues to accrue and payments can only be deferred for 12 months.

Borrowers and their co-signers should be aware of the terms of their loans, as default on a loan is possible after months of non-payment. In the event of default, the full balance of the loan becomes due and the student is no longer able to borrow from the government.

In the event the amount of federal student aid is not enough to cover expenses, students may pursue private loans. However, these loans often have high interest rates, strict repayment guidelines and other requirements that can cause potential issues for the borrower after graduation. All private lenders are different and have different requirements and criteria, so the borrower is advised to research heavily before applying.

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