Sometimes finding the ways to pay your college fee can put you in serious dilemma. However, there are many options available; you need to choose the lowest interest rate student loans. Therefore, minimizing your repayments interests.
Generally, when you want to pay for your college follow the order below, which is suggested by many financial experts.
- Use your fee money: This includes all the sources of money where you don’t have to repay. Like grants, scholarship or saving can be the best way of using for the fee payment.
- Use Federal loans: It is second best option after using your free money. You can use the government subsidize, which will pay your interest while you are in school.
- Use Private Loans: This should be the least preferred option for you. This is because of the variable interest rates (which can rise anytime), and fixed interest rates can be more than the rates offered by federal loans.
Federal student loans can be taken under two programs. The Direct loan and Perkins loan program. To apply for the federal loan, you need to file a free application for Federal Student Aid (FAFSA).
This loan is subsidized which ensures that the interest is paid while you are in the school.
- The interest rate doesn’t fluctuate; unlike other federal loans it remains fixed at 5%.
- The interest is paid while you’re in the school.
- There is no loan origination fee, which can reduce the final amount you get.
- Undergraduates can ask for only 5500 USD per year and 27000USD in total. Moreover, the graduates can ask for 8000USD per year and 60000USD in total.
- Your financial need should be extremely high to qualify for this type of loan.
- The school also needs to qualify to give this type of loan.
Direct Subsidized loans
This type of loan is also available for the students who want the lowest interest rate student loans by the FAFSA, but their bar is low. In direct subsidized loan Uncle Sam is the lender unlike in the Perkins loan where school was your lender. This loan is available for undergraduates only.
- Interest rate doesn’t fluctuate and remains fixed at 3.76%.
- The interest is paid while you’re in school.
- Undergraduates can ask for 3500 to 5500 USD only per year and 23000 in total.
- Graduate students are not eligible for this loan.
- You must have a severe financial need to ask for this loan.
- The origination fee is there (1.068% for every disbursement).
Direct Un-subsidized loans
For this loan type you don’t need to show your financial need. It is available for all graduates and undergraduates.
- The interest rate is fixed (for undergraduates 3.76% and for graduates 5.31%)
- No financial need is required to show.
- The interest will not get paid while you are in school.
- There is origination fee (for every disbursement 1.068%).
- Undergraduates can only ask for 5500 to 7500USD per year and 31000USD in total.
- Graduates can borrow 9500 to 12500 USD per year and 138500 USD in total.
However, there are many private loans which can offer you the loan at less interest, but they are not reliable. So, the quench for the lowest interest rate student loans can be fulfilling by different types of federal loan.
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