Receiving a higher education is a necessity in order to compete with today’s level of competition. It is often said that those who earn a college degree earn $1 million more than those who don’t have a college degree. However, because more and more high school graduates are attending college, the cost of getting a high education is rising. In fact, 75 percent of all high school students attend college. These numbers clearly show the importance of getting a higher education in today’s competitive work environment. Luckily, there are plenty of solutions used to help fund a student’s college education.
Student loans are made available in many different ways, and people with bad credit or excellent credit will take advantage of student loans to fund their educational goals. Student loans like government loans and private student loans are the most popular type of financing that students will use. The interest rate on a student loan should be an important factor for the borrower to consider before using a student loan. There are different types of student loans, which all will have a different interest rate on the loan. There are private student loans and government student loans. While government student loans typically have a lower interest rate than private student loans, students may be forced into using private student loans as well. The most popular type of government student loans is the Stafford loan. The Stafford loan has two primary loan types for students to utilize for their educational needs.
Stafford loans come in both subsidized loans and unsubsidized loans. Current interest rates on student loans like the subsidized Stafford student loan is around 6.80%. The unsubsidized Stafford loan has an interest rate of 6.80% as well. Student loan interest rates can vary from year to year depending on Federal interest rates and the interest rates in the markets. The Stafford loans for graduate students will have a different interest rate than the Stafford loans for undergraduate students. Undergraduate students will pay 6.80% interest on their unsubsidized Stafford loan. However, the subsidized Stafford loan is currently at 4.50% interest.
There are other types of government student loans like the Perkins loan. The Perkins loan has an interest rate of 5.00%. Parent PLUS loans also have an interest rate that will differ among the rest of the government student loans. Parent PLUS loans have an interest a rate of 7.90%. These interest rates are for the years 2010 and 2011, and the interest rates could change in the future, which they often do. Private student loans will have a varying interest rate as well, especially when compared to the interest rates that government student loans are associated with.
Private student loans are available in both variable interest rates and fixed interest rates as well. For example, some private student loans that are offered by major financial institutions will have an interest rate from 3.25% to 9.50%. The student’s credit rating will play a huge role with how much interest they will be paying on a private student loan. The higher the student’s credit rating, the lower interest they will pay on their private student loan. Consolidating student loans will also affect the student’s interest rate on the loan as well. In most cases, the student will save on interest if they consolidate their student loans.
Students can lower their interest rate on private student loans if they have the ability to raise their credit rating. Students should obtain a copy of their credit report to see if there are any mistakes on the report. If there are mistakes, the student should take action to have the mistakes removed in order to raise their credit rating. Students who consolidate their student loans will also improve their credit rating as well. Consolidating student loans will show a history of the student paying off previous debt. In fact, students have the option to refinance their consolidated student loans, which is highly recommended.
Since private student loans are offered by a wide variety of financial institutions, the student should take the time to research and compare rates online. Students should first pay off any debt that they can and fix errors that may be on their credit report before they shop online for a student loan. By doing so, students will effectively save on interest on their student loans. Those who have already graduated and are paying on their student loans are advised to research the options they have with student loan consolidation and refinancing.