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INTERNATIONAL STUDENT LOANS
For you to study anywhere in the world, you must carefully evaluate how much money you will need. Afterwards, make a research and apply for financial aid from your school, apply for scholarships, and/or find money from any other sources, including family funds. After utilizing these options, most international students still have a funding gap, and this is where international student loans come in.
What is a student loan?
This basically is a type of financial assistance given to students to take care of some basic Academic needs such as; Books, living expenses, tuition, school supplies etc. A good number of these loans are given to students in college with a very little interest rate. After these college students have completed their education they can now begin to pay back the loans.
Forms of student loans
You should know what your borrowing options are If you need money for college expenses.
There are basically three forms of student loans that can be applied for. These loans are under listed:
The two most common ways to borrow are actually federal student loans and private student loans.
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THE FEDERAL STUDENT LOAN
Federal loans are made available by the government while the private loan is made available by the banks, states and credit organizations. The type of loan you get is dependent on these factors;
1. Your needs
2. Year of study
3. Credit history.
After you’ve explored free money for college (that is, grants and scholarships), you may want to look into federal student loans, which the government provides.
Many of the federal loans offer interest deferment programs, (that is, the government covers the loans interest while the student is still studying). Students are not under obligations to start paying on the loans until after they have graduated.
TYPES OF FEDERAL STUDENT LOANS
There are five types of federal student loans. Through the Federal Direct Loan Program, They’re all provided by the government.
These five categories of federal student loans, it includes the Direct Consolidation loans, the one many experts advise students to look into to make payments easier when they graduate from college.
The Direct Subsidized Loans are basically based on financial needs.
The Direct Unsubsidized Loans are not based on financial needs. They’re also not credits based, so you actually don’t need a cosigner. The school will determine how much you can borrow, based on the cost of attendance and how much other financial aid you’re receiving.
The Direct PLUS Loans are credits based, unsubsidized federal loans for parents and graduate/professional students. Direct PLUS Loans for parents are also known as Parent PLUS Loans.
Its important to consider federal student loans before you take out a private student loan, because there are differences in interest rates, repayment options, and other features.
PRIVATE STUDENT LOANS
Private student loans generally are provided by banks and other financial institutions to help you pay your way through college.
What are the Pros and Cons of Student Loans?
The pros of student loans include;
1. The student loans can help you to afford your dream school rather than settling for an okay school
2:.The Student loans can help you afford college.
3. The Student loans can be used for other things apart from tuition, room, and board fees
The cons of student loans include
.1. Student loans are quite expensive.
2. Relying on Student loans means you start out life with debt.
3. Paying off student loans requires putting off other life goals
4. It’s nearly impossible to get rid of student loans if you can’t afford to pay your debt.
5. Defaulting on your student loans can affect your credit score.
Pros of Student Loans
1. The student loans can help you to afford your dream school rather than settling for an okay school
No doubt the private institution costs more than what the public university does.
Imagine that your parents did their best over the years to bring out money for your education, and they were able to save up enough money to cover four years at a public university. If the public university fits into your plan and offers the courses you want to take, that’s awesome. You can then graduate from school debts free.
But if it has always been your dream to go to a private school and your parents weren’t able to save enough money to cover all of it. You’d be stuck still having to cover the cost through other means probably a mix of financial aid and student loans.
Because students loan exist, you won’t be forced to go to just any school you can afford out of your pocket but you’ve been given the opportunity to make decisions through the existence of student loan . The decision you take is, ultimately, yours, and whether or not going to the more expensive school is the better decision will depend on your financial situation, Go to the okay school and graduate debts free, or go to your dream school and take out student loans to pay for it is your choice to make. student loans offer the ability to choose positively .
2:.The Student loans can help you afford college.
The average cost of college tuition, room, and board is way too expensive, according to College Board. A good number of college students or recent high school graduates can’t afford the cost for four years of college, Even when you seek for help from parents, it’s a small percentage of parents that can afford the cost like that without taking out any student loans at all.
The simple fact is, college is so expensive that for the vast majority of individuals, it would be nearly impossible to afford without the help of student loans. I would definitely say that something that allows you to follow your Dream and earn a quality education is not bad at all.
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3. The Student loans can be used for other things apart from tuition, room, and board fees.
Many people think that student loans is only being used on things like tuition, room, and board. though it’s true,because that is what you will use a good amount of your loan money on, you can also use your funds for important/necessary school expenses like buying of textbooks, getting a laptop, and computer software. These are not insignificant costs, and the fact that student loans can ease the burden on you and your parents is really a good thing.
When it comes to using your student loan funds, you should be smart/careful on how you spend it. Subject yourself to buying only the necessary things needed for your education. By keeping your school expenses as low as possible , you’ll be able to take out fewer student loans,that means more money in your pocket once you graduate from school.
Cons of Student Loans
1. Student loans are quite expensive.
When you acquire a student loan to pay for your college education, you don’t just have to pay back the exact amount that you borrowed: You will have to pay back with interest as well. This can range from 4.45–7% for federal student loans to a high percentage of 11–15% for a private student loans . On the high end, it can be comparable to a credit card. If you would be able to pay for college without using student loans, it would definitely be in your best interest to do so. And be sure to always sought for federal student loans first, before considering private student loan companies, in order to save the most money. Following this order when accepting your student loans helps you to graduate as cheaply as possible.
2. Relying on Student loans means you start out life with debt.
If you rely on student loans to pay for the cost of your education, that means that you will start out your adult life in debts. Sure, that being a college/university graduate might mean that you earn more money over your lifetime compared to someone with only a high school diploma. But, depending on how much you borrow, it could mean a difficult first few years out of college, especially if, like millions of other school graduates, you’re having a hard time finding a job that pays enough money to allow you to have a decent/comfortable life.
3. Paying off student loans requires putting off other life goals
Many university graduates who used student loan find themselves paying higher amounts, especially those who had to take out private student loans. That’s a money that you could be saving for a down payment on a house, finance a wedding, or
invest for your long-term financial goals. If you’ve got a huge amount of student loan debt, you might not be able to start pursuing other financial goals until after you must have finished paying off your debt, and at that point you’ll have to double your efforts to make up for the lost time.
4. It’s nearly impossible to get rid of student loans if you can’t afford to pay your debt.
If you can’t afford to pay for your mortgage, your credit card bills, your medical bills, or your car loans it might seem like your world is coming to an end. But you’ve got one final emergency valve you can release in those situations which can allow you to find your way out of debt: which is to declare bankruptcy.
Declaring bankruptcy is not something to take lightly. Yes, it’s capable of reducing the amount of money you owe on your debts, but it will also cause your credit score to drastically fall for nearly a decade after the process is done. It’s there for emergencies.
Unfortunately, declaring bankruptcy will rarely get rid of your student loans. Under current law, they’re almost impossible to discharge in bankruptcy, and that’s a big deal for people who find themselves unable to pay for some reasons. Imagine not having health insurance, being diagnosed with a disease, and then needing to declare bankruptcy because you can’t afford your hospital bills. then, on top of that, still having to pay/clear your student loans debts.
Luckily, there are some other possible ways of getting rid of student loan debt which are through discharge and forgiveness .
5. Defaulting on your student loans can affect your credit score.
If you are irresponsible/reckless with spending your student loan, you can cause significant damage to your credit score. responsibly using of student loans can help you build a credit history and, with it, also build a credit score that will be useful throughout your life. But the alternative also holds true:
An irresponsible use of student loans invokvesTaking out more than you can expect to pay off after graduation, failing to make your monthly payments on time, and defaulting on your student loans can all have major negative consequences on your credit score. Defaulting is the worst of all outcomes, as it could mean that you’ve gone for like 270 days without making a payment on your student loan.
A bad credit score can follow you all through your life, making you pay more for everything from credit cards to car loans to mortgages. It could even cost you your job.
Luckily, if you find yourself unable to make your student loan payments, you have some options available to you. Income based repayment plans can assist you in finding a payment amount that fits into your monthly budget; deferment and forbearance can see you through periods of economic hardship, and the Education department has even set up a default rehabilitation program to help you recover from default without damaging your credit score. If you can’t make your payments, you need to communicate to your lender .
A Necessary Risk
Honestly there is nothing inherently bad or wrong with the concept of student loans. People borrow money to pay for things that they need at every point in time. Car loans, mortgages, college e.t.c think of all the significant things that you might not be able to afford without borrowing and paying back when its due. Would you be better off if you could pay for all these things yourself so that you won’t need to pay interest on top of what you borrowed? Of course. But for many individuals that just isn’t an option.
A Student loan, used properly, can make a lot of sense and can be used for a lot of good. The real issue isn’t the concept of using student loans, but the reality which includes High interest rates, laws that make it near impossible to discharge college debt even in bankruptcy, astronomical college prices that pulls down the dream of a college education out of reach of millions of people each year.. That’s why it’s so important that if you decide to take out student loans, you try as much as possible to limit the amount you borrow and then pay them off once you graduate as quickly as possible.
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HOW LOANS WORK
When money is borrowed in form of a loan you will have to pay back the amount with interest within a range of time. The terms of each loans are provided by the lender. The interest is divided into 5 categories; The Simple interest, the compound interest, the Amortized interest, the fixed interest and the variable interest.
The Simple interest: To find the interest due, the simple rates are multiplied by the principal at each payment period.
The Compound interest: This is common for savings accounts and credit cards. The compound rate charge interest on previously earned interest and on the principal
The Amortized interest: This particular loan is designed so the borrower pays a larger amount of interest rather than the principal at the start of the loan. After a while, the amount of principal will increase in each payment, bringing down the amount of interest charged on the principal as well as the principal amount
The Fixed interest: A fixed interest rate stays the same over the term of the loan thereby predicting the budget for payment.
The Variable interest: this rate change over the term of the loan. Basically it means that the interest rate for the loan could go down or up over the term of the loan.
Owing to high cost of education, most students cannot afford to pay the cost with their current income or savings, education is more important than the cost of it, so students turn to student’s loans for financial support (aid). It is best to know and understand how student’s loan works before applying for one
We took a look at some of the most common reasons so many people now consider a student loan to help them through university.
1. Great rates
Government student loans have low interest rates and you don’t pay back until you’re earning a certain amount. Similarly, with a private loan from someone like Future Finance, you benefit from lower, capped repayments in study.
2. Chunky tuition fees
Course costs have increased dramatically in recent years. At a standard £9,000 per year, its highly likely you’ll need to take a loan government or private to afford you annual fees.
3. Living expenses
The costs of living for three years (or more) can soon mount up, especially if you’re studying in one of the big UK cities. A maintenance loan from the government or a Future Finance student loan can help give you a decent standard of living.
4. Peace of mind
Instead of worrying about next months rent, a good student loan can help give you a sensible long-term finance so you can stay relaxed, energised and focused on your studies.
5. Invest in the best
Higher education is increasingly seen as an investment in your future. Why should you deprive yourself of the life and career you really want because you dont have the money to pay for it right now? A smart, flexible student loan can help you realise your potential and achieve your goals.
HOW TO APPLY FOR A STUDENT LOAN
In the US, you apply for a federal student loan by first filling out and submitting the Free Application for Federal Student Aid(FAFSA) at FAFSA.ed.gov
Then you receive a financial aid award letter by mail or email from your school financial aid office. The received letter is a summary of your available financial aid(student loan) , the summary of direct subsidized loan if you’re eligible and direct unsubsidized loan.
Then you contact your school’s financial aid office to accept the financial aid and student loan
Finally you review and sign an associated paper work like the Master Promissory Note (MPN)
Tackling your student loans anticipatorily is the key to paying them off sooner rather than later. There are several ways to manage your debt more effectively, but the worst thing you can do is relenting.
When you borrow money for your education, your first question would be how best am I going to pay off my debts? The simple answer is that there’s no magic route, but there definitely are things you can do to make paying back student loan easier.
The statistic of Student loan debt in 2019 reached a high number of 1.41 trillion so you’re not the only one. A growing part of the economy is devoted to helping individuals figure out how to pay off their student debt.
Now, examine these nine tips to help you get a handle on your student loans repayment faster than expected.
1. Know the amount You Owe
The first important step in repaying student debt is knowing the amount you owe. Take time to figure it out, if you have not yet done that.
Once you’ve figured it out, you can then move on to the next step, which is choosing a repayment plan.
2. Examine Student Loan Repayment Options
How you choose to repay your loans basically depends on three factors: the type of loans you owe, how much you can afford to pay, and your money goals.
Joe DePaul the CEO and co-founder of College Ave Student Loans says;”Financial goals are different for everyone,”
.”Some may want a longer repayment plan that allows more suppleness in their monthly budget, while others may go for a repayment plan that allows them to pay off their debts as quickly as possible.”
There are options to consider in student loan repayment. If you desire flexibility and you owe federal student loans, then you can look at an incomes driven repayment plan. There are a good number of choices that calculate your monthly payment based on your income and household size and allows/gives you more time to repay your loans than you’d get on a standard 10-year repayment plan.
N/B: Incomes driven repayment plans can offer loan forgiveness after a good number of years, but any forgiven loan balance might be treated as a taxable income.
You might wish to stick with a repayment plan that has the shortest term, if you wish to repay your loans as quickly as possible.
The condition is that you’ll have a higher monthly payment. The best way to examine loan repayment options is to use a loan repayment calculator, such as the one made available by the Department of Education.
3. Utilize your Grace Period to Your Advantage
The grace period is the period in which you aren’t required to make payments on your loans. With federal student loans, the grace period lasts for the first six months after your graduation.
For private loans, whether you will have a grace period and the time frame depends on the lender. During this grace period with private loans and unsubsidized federal loans, it is important to note that interest is still charged and will be “capitalized”(added to the total amount you owe) after the end of the grace period.
One way to make the grace period work to your advantage is to make advance payments against your loans. Paying down some of the principal implies less interest that accrues later.
4. Consider joining or Refinancing Student Loans
Joining and refinancing offer two ways to streamline student loan repayment. With student loan consolidation, you can combine multiple loans together at an interest rate that reflects the average rate paid across all your loans. This can be done with federal student loans to combine multiple loans (and monthly loan payments) into one.
Refinancing is a bit different. You’re literally taking out a new loan to pay off the old loans, so you still end up with one monthly payment. But if the new loan has a lower interest rate compared to the average rate you were paying for the old loans, you could also save some money provided you don’t extend the term. One thing to note about refinancing private student loans is that you’ll need good credit to qualify, which may necessitate involving a cosigner onboard.
Be very careful to avoid student loan scams, which are particularly rife if you try to refinance your loans or investigate loan forgiveness.
N/B: You can refinance federal and private loans together into a new private student loan, but doing this might cause you to lose certain federal loan protections on your federal loans, such as deferment and forbearance periods.
5. Pay your debts automatically
Scheduling your student loan payments to be deducted from your checking account automatically each month means you don’t have to worry about late payments, which might hurt your credit score. You can also score some interest rate savings if your lender offers a rate discount for using autopay (federal loan servicers and many private lenders do so). The discount may only be a quarter of a percentage point, but that can make a big difference in how quickly you pay off the loans over the time.
6. Pay Extra amount and Be Consistent with that
One thing that can slow down your debt payoff is paying only the minimum due. The founder of personal finance blog money life, Joshua Hastings, was able to pay off $180,000 in student loans over a three year period by paying extra on his loans every month consistently.
“When deciding which student loan to pay off first, it’s best to choose the one that can quickly free up cash flow. That way you can have extra money to pay for the next loan,”
7. Apply ‘Found Money’ to settling Loan debts
Using found money (meaning money that isn’t budgeted for as part of your monthly income) is another way to progress with student loan repayment. Found money includes:
You can add these amounts to your loan principal to take out a part of your debt in one go. Other opportunities to use found money to pay down loans includes inheriting money from your relatives or receiving a settlement as part of a lawsuit.
8. Consider Forgiveness and Reimbursement Programs
Public Service Loan Forgiveness is designed to present students with debt relief for students who pursue careers in public service. You make a good number of payments while working in a public service job and the remainder is forgiven.
If you are not eligible for loan forgiveness, you may be able to get help with your student loans through your employer. Talk to your Human Resource department about whether student loan reimbursement is available as an employee benefit and what you need to do to qualify for it.
9. Attempt Biweekly Payments
Another method you can consider with paying off student loans is switching from monthly to biweekly payments. Identical to making biweekly payments on a mortgage, this tactic results in you making one extra loan payment per year.
You’ll need to talk to your loan servicer to find out whether automatic biweekly payments are acceptable, but if not, you may be able to make supplemental principal payments at any time through your online account access.
The upward tendency of making extra biweekly payments yourself, compared to paying automatically, is that you can make the payments when it fits your budget and skip them if there’s a month when you don’t have the extra cash to spare.
Conclusion
You’ve got little to no financial constraints any longer with regards to studying abroad as an international student because you have opportunities to receive financial aid through loans made available to you. But, at the end of the day, the decision is yours to apply for loans. We wish you all the best!
This post was last modified on August 4, 2022 6:37 pm