What is a Student Finance Corporation?
Student Finance Corporation is an organization which deals with lending to students for educational purposes. Normally the loan would cover tuition fee and other associated expenses like lab fee, living expenses money for books etc.
Who can get this loan?
Student loans come in many forms and the eligibility for them varies. The two broad types are federal and private. There are various types of loans for undergraduate, graduate and degree courses. The amounts depend on one’s financial standing, grades, course for which application is being made.
The Student Finance Corporation has two broad umbrellas under which it provides loans -Federal and private loans. Federal loans are provided under the Federal Family Education Loan Program and are guaranteed by the government. Among Federal Loans Stafford loans are the most common ones and are subsidized and otherwise. Perkins Loans is another Federal Loan which is more desirable based on the terms at which it is available. However each campus is only allotted with a certain amount of Perkins loans and is for students with the greatest financial needs.
For private loans the financial standing pay a much more crucial role in determining the loan amount than the financial needs and they are based on your credit ratings etc.
How do I get the loan?
The student finance corprations disburse the loan directly to the schools normally and the schools after charging for their tuition etc. will pass on whatever remains to you in the form of a check.
How much interest will I have to pay?
That again depends on whether you have a subsidized or unsubsidized loan. A subsidized loan is one where the government pays the interest on the loan while you are attending school and is given on a need basis. The interest rate is generally floating however for the popular Stafford loan program does not exceed 8.25% and which is currently at 5.3%.
The interest rate for the Perkins loan is just 5% whereas PLUS a loan which is another Federal loan is currently at 6.1%.
The interest rate for the private loans depends on your credit ratings and usually is between 1 – 7% of the Prime Interest Rate.
One must keep in mind that while the not for profit organizations do not charge any fee other organizations apart from charging interest may also charge a fee which can again be around 4% of the loan.
In most cases the interest starts accumulating as soon as the loan is disbursed so even when you are not repaying the loan you are being charged interest which you will have to pay later on.
When do I repay the loan?
After finishing your course there is normally a six month grace period after which you will have to start repayment of the loan. In case of a subsidized loan there will be no interest in this grace period as well. Normally the repayment period will not exceed 10% and in the case of some loans like the Perkins loan you have to pay the school directly.
Here again there are various ways in which the student finance corpration can ask you to repay the loan. There can be fixed payments which mean that you will have to pay the same amount every month till the end of the loan. Or there could be repayment which is based on your gross monthly income.
Then there are two tiered and four tiered repayment options which basically involve lesser outgo at first and then gradually the payment has to be increased.
If you have taken multiple loans then there is an option for consolidation of loans also. What this basically means is that all your loans will be clubbed together by the corporation and the longest term will be taken with the interest rate as the weighted interest rate of all your loans.
Even when you pay the installment you save tax!
The amount that you repay is allowed as a deduction for tax purposes and the maximum than can be claimed is $2500 over the life of the loan repayment at the time of writing.
Here is the result of some research which is well worth considering. Everything is explained on the introductory page so check them one at a time and don’t simply glean through or you may miss something relevant - If you don’t qualify for government grants or loans, you can still get a competitive loan if you take the time to search for the right lender. Ask for loan quotes and compare them.
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Tags: federal student loans, private student loans, student loans