Alternative Student Loans
Consider Alternative Student Loans To Finance High Education Costs
Alternative student loans are definitely worth considering. Compared to other types of credit, government student loans consolidation can get a bit complicated. The many plans with their variety of terms, complex conditions, and bewildering fine print make it necessary for the student borrower to study all the options carefully before deciding on the best choice for the long-term.
Stafford Student LoansFor instance, in the United States, thousands of college and university students have taken out Stafford loans to help finance their post-high-school education, and they have experienced some definite advantages.
First, there is no collateral required nor is there any credit check performed, so almost anyone can qualify. And while you’re attending classes there are no payments required, but you must be enrolled at least half time.
When you graduate or leave school, there's a six-month grace period before payments must be made. And there are no prepayment penalties, so you can choose to repay any remaining balance at any given time. That's all good.
But, there is a limit on how much money you can borrow in a single year. And although Stafford interest rates do appear attractive compared to other loans, there are often additional charges or fees to be paid which do add up.
In addition, there are low interest student loan consolidation plans where the repayment term can be stretched from 10 years to a maximum of 30 years; this results in lower monthly payments, thereby reducing the monthly impact of your cash flow.
While this sounds attractive, on a loan of $10,000 with the student loans consolidation rate at 7% over 10 years, the total accumulated interest is $3,933 -- over 39% of the amount borrowed. And consider that most students borrow more than $10,000. Imagine the interest charged with the repayment term stretched out to 30 years. It definitely gets expensive.
Consider Alternative Student LoansParents looking to finance their child's education should investigate alternative student loans, even though it might require making monthly payments from the start.
Students should also investigate possible solutions for themselves. A combination of educational grants, scholarships, savings, and personal loans repaid using part-time income could minimize the need for a student loan and greatly relieve the financial burden felt by their parents.
One of the best options is an educational saving plan, registered or otherwise, especially if they are started early in the child's life. Of course, there is always the risk that inflation, financial emergencies, and unforseen circumstances will affect the value of the investment when it's required.
Other options such as tax free municipal bonds, inflation-adjusted hedge funds, or various kinds of investments can help to offset such effects.
Unfortunately, today's education costs are high and growing higher, and there is no easy way to finance them. But, if you make the effort in the beginning to review all the options available, including alternative student loans, you will save everyone time, money, and frustration in the end.
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