Paying for a college education can be a very expensive venture. Tuition, books, fees, housing, utilities, cell phone bills, food, car payments, insurance, it just keeps on going and going. As a student, you are trying to balance school, possibly working and paying for all of these expenses. Most college students think the easiest way to easy this burden is a credit card. They think that putting all of their expenses on their credit cards is the best solution.
The truth is this is that one of the worst ways to deal with your expenses. Here at EdFed we want you to know about a much more convenient and less expensive way to fund your schooling: federal student loans. Federal student loans have many advantages over credit cards.
Federal student loans have much lower interest rates than credit cards. As of right now, the average interest rate on a credit card can vary from 10% to 13%. What's even more surprising is that if you take out a student credit card, the rate can hover somewhere as high as 17%! These rates are amazingly high and cause you even more trouble when it comes to escaping your college debt.
On the other hand, federal student loans have much lower interest rates. A federal Perkins loan has a low 5% interest rate. Stafford loans have an interest rate of 6.80%, and federal PLUS loans carry an interest rate of 8.50% or 7.90%. Interest rates are a game of numbers and as you can see from this comparison, federal student loans win.
Deferment and Forbearance
With credit cards, you are required to pay off the card regardless what your financial situation is and in spite of any financial hardships that may fall upon you. Credit card companies figure you got yourself into debt so it's up to you to get. Federal student loans however, are different.
With federal student loans you are given a deferment and forbearance options. These options allow you to temporarily suspend payments on your loans during financial or other hardships that may hinder your ability to make your monthly payments.
You Can Consolidate Your Student Loans
One of the largest differences between federal student loans and credit cards is the ability to consolidate all of your federal student loan debt. When you choose to consolidate through EdFed, we lock you in at a low, fixed interest rate allowing you to dodge rising variable interest rates. Plus, with our added borrower benefits, your interest rate can reduced even more! This allows you to save almost 50% off of your bill each month! Moreover, when consolidating with EdFed we make it easier to pay your bills. By combining all of your loans into a single consolidation loan, you are only responsible for one, low monthly payment.
Once you have consolidated your federal student loans, the benefits over credit cards become even more profound. With many credit cards, you must pay a high monthly amount, no matter how much debt you have. With a consolidation loan from EdFed, your repayment period is tied directly to how much you have in student loans. Depending on how large your consolidation loan is, you can have anywhere from 10 to 30 years to repay your loan. When you consolidate your student loans through EdFed, we offer you a repayment plan, allowing you to take control of your financial future.
When dealing with your college costs a credit card might seem like a tempting, easy way to put off paying your bills. But in all reality, the high interest rates of credit cards will quickly have you dealing with more debt than you bargained for. Rather than signing up for credit cards, take out student loans to finance your education. With lower interest rates, forbearance and deferment options, the ability to consolidate with long repayment periods, why wouldn't you choose student loans?
Article Title : Federal Student Loans compared to Credit Cards
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How EdFed Helped others!
The service I received from EdFed was unbeatable in comparison to other lenders. They were highly trained and very friendly. I felt confident that they could help me, and they did. I saved $23,261 on my federal loans. Thank you EdFed! - Jake K. Omaha, NE
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