College Loan Consolidation, Federal Loan Consolidation, Private Loan Consolidation, Student Loan Consolidation

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Know Your Loans
By Emily Zaborniak
When the scramble to earn financial aid is on, college students might find themselves accepting student loan offers without doing much research on them. At the time, it is a resounding sigh of relief to have the costs of education temporarily funded; but when the tassels are moved and the diplomas are mailed, many graduates find that they should have learned more about their student lending.

One of the biggest missteps occurs when the difference between federal and private loans is overlooked. True to their name, federal student loans are guaranteed by the federal government; therefore, currently, they carry a fixed interest rate of 6.8%. Even though the overall "fixed" rate may fluctuate yearly, a borrower still has the opportunity to lock it in. Concerning private loans, there is no cap on the interest rates and fees lenders can charge-as a result, unsuspecting borrowers find themselves buried in debts larger than anticipated.

Jeremy Hynd found himself in that exact, dreaded situation. He shares his story with Sandra Block in a recent USA Today report. Hynd discovered $27,000 could not be consolidated along with his federal student loans because the said amount was from private student loans. While still in school, he helplessly watched the interest rates on his two private loans hike higher and higher, inflating to an astounding 3%. Now, the 24-year-old analyst at Sony Pictures works a second full-time job to chisel away at the accruing interest, and to pay off his loans as quickly as possible. Unfortunately, Hynd's situation is not uncommon.

Despite the drawback of interest rates, private loans do serve an effective purpose. In fact, more and more families find themselves relying on them to make college educations possible. The largest reason private loan lending grows annually is because some students take out the ceiling of Stafford Federal Student Loans and still fall short of meeting their expenses. Since 1992, the total amount that undergraduate dependents may borrow from the Stafford Federal Student Loans Program has been $23,000. Because the total has not adjusted to complement tuition raises, education simply has become unaffordable without loans.

Both federal and private student loans come with pros and cons. With a private loan, a borrower can take out more money but may pay it off at a higher rate. For federal, it is the opposite. Also, private lenders are entitled to their own regulations, whereas federal loans are openly operated by set government standards. One example of discrepancy in these programs is the responsibility of private and federal loans during times of economic hardship. If a borrower cannot make a federal student loan payment, he or she can defer, with proof, for up to three years. In cases of private lenders, it is specific to the company as to how the matter will be handled.

Do not let the process of loans be intimidating. It is important to weigh out all of the options. The best advice before taking out student loans is "education first," in every aspect.


Article Title : Know Your Loans
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Education is one of the most basic right of any human, but with the increase in prices and the costs involved in education this has made these rights turn into a privilege which very few can enjoy. Any normal person today in the whole of United States has to take an education loan at one point of time to pay for their education fees.

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Schools Will No Longer Receive Paper FAFSA Forms
(September 20, 2007)

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