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The list of the 5 best reasons to get a student loan follows the article below


Charley Brindley


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Two little girls getting a head start on their college fund

Photo credit: Life Hackery

What Loans are Available?

Beware of lenders with shaky reputations. Amidst all the excitement of being accepted into college or graduate school, you'll want to take the time to research how you will finance your education. It could mean the difference between crippling debt and manageable debt.

Understanding Federal Loans

Federal loans are your best bet because they are often subsidized by the government (meaning interest will not accrue while you are in school), can be locked in after graduation at comparatively lower rates and offer much more flexibility in terms of repayment.

Student Loans: Stafford loan: There are two types of Stafford Loans, those financed through a private lender, usually a bank or credit union ("FFELP loans"), and those financed directly through the U.S. government ("Direct loans").

Stafford loans are granted either subsidized (the government will pay interest while you're in school) or unsubsidized (you will be responsible for interest payments while in school, though you should be able to defer these until graduation). To receive subsidized loans, students must demonstrate financial need. The general breakdown according to is: "About 2/3 of subsidized Stafford loans are awarded to students with family AGI of under $50,000, 1/4 to students with family AGI of $50,000 to $100,000, and a little less than 10% to students with family AGI over $100,000." All students are eligible for unsubsidized Stafford loans. ("AGI" stands for "Adjusted Gross Income" and is your family's annual gross income minus any exemptions allowed by the government when filing your federal income tax return.)

What you can borrow with a Stafford loan: Stafford Loans allow dependent undergraduates to borrow up to $3,500 their junior year, $4,500 their sophomore year and $5,500 for each remaining year. Graduate students can borrow $20,500 per year, although only $8,500 of that is subsidized. There are also cumulative limits of $23,000 for an undergraduate education and a $65,500 combined limit for undergraduate and graduate.

Perkins loan: This loan is one of the most recommended because you lock in a 5% interest rate and schools pay the interest while you're in school. The repayment term is 10 years. Undergraduates can receive up to $4,000 per year and graduate students can get up to $6,000. The cumulative limits are $20,000 for undergraduate loans and $40,000 for undergraduate and graduate loans combined.

Students receive Perkins loans based on financial need, and the loans will come directly from their schools.

For teachers, some volunteers, and public service professionals, your Perkins loan may be forgiven over time. See Mahalo's guide, How to Apply for Loan Forgiveness to get a clearer sense of how to qualify.

Loans for Parents:

PLUS loan: The Parent Loan for Undergraduate Students, or PLUS, allows parents to borrow from the federal government to pay for their children's college educations. Graduate students are also now allowed to take out PLUS loans for their continuing education, thus if you are a parent, you should refer to the PLUS as the "Parent PLUS" (as opposed to the Grad PLUS).

Use's comparison chart to see the differences between Stafford and PLUS loans and what you will owe on both over time.

PLUS Loans have a fixed interest rate of 8.5%. They are unsubsidized, meaning someone is responsible to make interest payments while the student is in school. PLUS loans also charge fees of 4%, deducted from each disbursement check.

Story credit: Mahalo

Two girl students at work

Two girl students at work in the school library

Photo credit: Daily Mail Online

The 5 principal reasons why students get loans for school

1. Your parents can't afford to send you to college

2. You have other financial obligations

3. You have poor credit

4. You have no income of your own

5. You need to consolidate all your monthly payments

Old shack with truck and junk cars

Maybe your family is poor

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1. Your parents can't afford to send you to college

Many college students still rely on their parents for financial support throughout most of their college years. It used to be a bit more difficult in past years to “share” money but in today’s society there is many more option for making money available to far-away college students. One of the more common ways for parents to ensure students have access to funds is by establishing a joint bank account, either checking or savings, where both the student and the parent can make deposits and withdrawals conveniently. Students can write checks or use a bank card to purchase books or other supplies they might need.

Students may also be listed on credit cards as an authorized card user. Parents can set spending limits, often through the card company and must establish guidelines for responsible spending and credit card usage until the student is ready to begin building up their own credit.

Another option outside of traditional banking methods can be done through Paypal, where an account can be accessed by both student and parent nearly instantaneously. While a bank account is a requirement of the account setup process, parents of students who may attend school outside of the state or in an area where there are no branches of the banking institution, can utilize the service to transfer money into the student’s account, and the student can access the funds through the debit card at an ATM or most retail locations.

Obviously, cash is an easy option but perhaps not always a wise one. Having a large amount of cash on hand can leave the student vulnerable to thief or other criminal acts. Also, it may be a temptation for the student to spend it frivolously simply because it’s there.

Not matter what route you choose to take, parents and their children need to work together to develop a solid, working financial plan. Each party should know exactly what is going on and what is expected. If a student is given a credit card for use at school, there needs to be an understanding of who is paying the bill and what purchases are approved. Both parent and student need to keep an open line of communication about money matters and have realistic expectations. For many college students, this will be the first lesson in real world responsibilities. Having a solid foundation financially as a student will help to better prepare them for the future outside of the campus.

There are many options to consider during what is usually a hectic time. Being prepared before sending your kids off to the dorm is everyone’s best interest. Research the financial options available to college students and parents. Contact the college and ask for planning materials and other information that can help keep things in perspective. College educations are certainly not getting any cheaper and financial issues should not be kept hidden from the student. It is an excellent life lesson for the next generation of adults.

Story credit: University Parent Connection

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What a pile of debt

Photo credit: The Debt Defier

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2. You have other financial obligations

Across the country, millions of people are finding it more and more difficult to meet their financial obligations. As mortgage interest rates rise, Adjustable Rate Mortgage (ARM) payments skyrocket. Credit card late fees continue to climb higher. Lenders keep offering credit to people who are in desperate need of help, but this only prolongs the problem, and often ends up simply increasing the total debt owed by a person.

Thankfully, there are a number of options available if you find yourself in this situation. Debt Negotiation, Debt Settlement, Repayment plans, and Debt Consolidation are just some of the opportunities you can pursue. Of course, you need to find the right solution, and just as importantly, the right company to work with to address your financial needs.

When looking at debt relief programs, there are a number of factors you should consider. Some of these include:

Solutions. Does the company only offer one debt relief solution? Or are they well-versed in a number of options? Having a variety of choices means they can find the right debt relief program that fits your specific needs.

Cost. How does the debt relief company get paid? The best ones will earn their money from a percentage of what they save you; that way, they only get paid if you save money.

Dependability. There are many fly-by-night debt relief organizations out there. How long has the company been in business? Are they affiliated with the BBB (Better Business Bureau)? Is this a company you can trust?

Story credit: Top Consumer Reviews

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This could be a problem

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3. You have poor credit

You may be thinking, “I will never get a student loan, because I have credit problems!” Well, rest assured that you can! In fact, there are student loans with bad credit available to people just like you! It may take some searching, but you can find loans through private or government institutions. You may have bad credit or a lack of credit that is inhibiting you. We all like to think our kids are the smartest on the planet, but the fact is they may not all qualify for a scholarship. This is where student loans are helpful. As with any loan, research is advised even if you are looking for student loans for people with bad credit.

Start by researching student loans on the Word Wide Web. You do need to be cautious though, because there are some fraudulent sites out there. Whatever financial institution you choose, make sure that it is a reputable company. Find out the company’s reputation by contacting the Better Business Bureau and searching web forums to find out other people’s experience with that lender. It’s also a good idea to get several quotes before choosing a lender. You’ll want to choose the one offering the lowest interest rate.

When you begin, look for low interest in the 5-8% percent range. One of the best is the Perkins Loan at 5%. These are available through the college. However, you must specifically ask for them. Most colleges do not like to discuss these loans for obvious reasons. If the student cannot get the loan himself or herself due to bad credit, the parents can apply on their behalf if they have a better credit history. The parents or a relative can co-sign on behalf of the student. The lender has backup in case the student defaults on the loan. Students and lenders understand the pressures of getting money so the popularity of student’s loans with bad credit is growing.

Unfortunately, with the rising costs of education it is almost certain that everyone at one point will be asking for student loans with bad credit to attend the college of their choice. Lenders understand that a higher education aids the individual in getting that good job and thus repaying the loan sooner. You should always look around and find the best deal for you. It is definitely worth the effort when you see the amount you can save in the future.

Story credit: Atriclebase Free Online Articles Directory

Poor young man playing violin on the street

Poor young man playing violin on the street

Photo credit: Flickr Photos

4. You have no income of your own

President Obama's budget addresses both the immediate economic concerns as they relate to higher education as well as sets the stage for future higher education investment and success.


Nearly 5.6 million students from low and moderate income households are able to attend college this year due in part to Pell grants. Originally designed to cover 80% of the cost of college, Pell grants currently cover just 1/3 of the cost. Presently, Pell grant funding is discretionary and determined by the annual budget process. The budget will make Pell grant funding mandatory to help eliminate uncertainty and prevent funding shortfalls. The budget also increases the Pell grant maximum to $5,550 for the 2010-11 school year and indexes the maximum grant to grow with inflation in the future.


The American Recovery and Reinvestment Act created a new partially refundable $2,500 American Opportunity Tax Credit over the next two years to provide a tax break to millions of families, including low-income families who don't pay taxes and therefore currently get no tax relief for college. Up to $1,000 of the credit is refundable for low-income families, and the credit itself is phased-out for taxpayers whose adjusted gross income is in excess of $80,000 ($160,000 for married couples filing jointly.) The budget proposal makes the American Opportunity Tax Credit permanent.


There are two federal student loan programs -- the Federal Family Education Loan (FFEL: undefined, undefined, undefined%) program and the Direct Loan program. FFEL loans are federally guaranteed loans issued by banks and other lenders, who are provided subsidies by the federal government for providing the loans. The tightening of credit markets essentially made the FFEL program untenable on its own last year prior to the passage of the Ensuring Continued Access to Student Loans Act. The proposed budget would end the FFEL program and subsidies to lenders on all federal student loans beginning in July 2010. The Direct Loan program, which has operated successfully since 1994, issues loans directly from the U.S. Department of Education. Transitioning entirely to the Direct Loan program is projected to save taxpayers $4 billion a year that can be used for increased student aid, rather than lender subsidies.


Perkins Loans are low-interest federal loans available to students enrolled in a participating college or university with a demonstrated exceptional financial need not met by Pell grants or other federal loans. Currently, only 1,800 out of 4,400 institutions participate in the Perkins loan program. The budget proposal would seek to make Perkins Loans available to more than double the number of institutions it currently serves. The budget would also increase funding for Perkins Loans by $5 billion -- up from the current $1 billion available in Perkins Loan aid. President Obama also proposes restructuring the program to provide an estimated 2.7 million additional students with the average Perkins Loan each year -- a five-fold increase over the current 500,000 students receiving Perkins Loans.


The budget provides for a five-year, $2.5 billion fund available to states for innovative programs and research aimed at improving college success and completion rates, particularly among students from disadvantaged backgrounds.

Story credit: Fox Business

Worried woman with too much debt

How much debt is too much?

Photo credit: My Debt Consolidation Advice

5. You need to consolidate all your monthly payments

Reasons to Consolidate

The key benefits of a consolidation loan include the following:

Single monthly payment. Consolidation replaces the multiple payments on multiple loans with a single payment on the consolidation loan. A student might graduate with as many as a dozen loans or more. Consolidation combines these into a single loan with a single monthly payment. This simplifies the repayment process.

Alternate repayment plans. (More manageable monthly payments.) Consolidation provides access to alternate repayment plans, such as extended repayment, graduated repayment, and income contingent repayment. Although these plans may be available to unconsolidated loans, the term of an extended repayment plan depends on the balance of the loan, which is higher on a consolidation loan. Alternate repayment plans often reduce the size of the monthly payment by as much as 50% by increasing the term of the loan. This can make the monthly payments more affordable and management, but it does increase the total interest paid over the lifetime of the loan.

Reduces the interest rate on some PLUS loans. Consolidating an 8.5% fixed rate PLUS loan reduces the interest rate by 0.25% because of the lower 8.25% interest rate cap on consolidation loans. To maximize the interest rate reduction, the PLUS loans must be consolidated by themselves. However, one must also consider the impact of consolidation on available student loan discounts.

Resets the clock on deferments and forbearances. Consolidation resets the 3-year clock on certain deferments and forbearances. A consolidation loan is a new loan, with its own fresh set of deferments and forbearances. This is a useful tool for medical school students, who do not get an in-school deferment during the internship and residency periods. They are, however, eligible for an economic hardship deferment for up to three years. If they need more than three years, consolidation is a useful tool for getting up to another three years of deferment.

Restarts the loan term on loans already in repayment. Even if you stick with standard ten-year repayment, when you consolidate loans that are already in repayment, it resets the loan term on those loans, since a consolidation loan is a new loan. This can give you some of the benefits of an alternate repayment plan, such as a lower monthly payment, without extending the term as much as typically occurs with extended repayment. On the other hand, if you are close to the end of your repayment term, you might want to avoid consolidation because the savings will not be great enough for it to be worth the bother.

Story credit: FinAid The smart student guide to financial aid

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