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How to Choose the Best Type of Student Loan

Student loans exist to help financially needy students get through college. Sometimes grants and scholarships do not cover the whole tuition fee, or you fail to get them. The next option you have is to consider getting a student loan. Well, both the government and private banks offer loans, but the government has more friendly terms such as lower interest. Let us look at the best student loans to consider.

1. Government/federal loans

There is a variety of loans within the federal government. Apart from the loans offering lower, fixed interest, they give borrowers several repayment plans. Your credit history is not a requirement when applying for a federal loan.

The other advantage of getting a federal loan is that if you get employed in the public service sector, you may access loan forgiveness plans. Federal loans can also be subsidized making them more affordable for students. You will start making payments six months after graduating. If you have decided to borrow a federal student loan, it’s mandatory to fill up a FAFSA which is a ( Free Application for the Federal Student Aid) form online. From here, you will find loan options that suit your needs.

2. Private loans

When grants, scholarships, and federal loans are not meeting your financial needs at school, it is time to consider the private sector. Banks that offer best student loans understand the higher risk the loans pose. They lack collateral or assets. For this reason, their loans have high-interest rates.

One concern about private loans is they require a great credit score. Many students fail to achieve a good score forcing them to get a cosigner. Unlike federal loans that have fixed rates, private loans have variable rates. This depends on changes in the market.

While the government can offer forbearance and defer payments due to hardships, private banks do not provide such privileges. Even if they allow forbearance, it is up to them to decide whether to grant you forbearance or not. There is no guarantee that you will get it.

Therefore, only go for a private loan when a federal loan is not enough for you.

When do you need a cosigner for a private loan?

If you have a weak credit history, think about getting a cosigner. Such an arrangement may earn you lower rates on your loan. Remember to choose a loan with a fixed interest rate so that market fluctuations do not affect you. Through cosigning, you will be able to boost your credit.

Lenders release your cosigner when they believe you are going to pay them. They determine this after you have left school and have made several payments on time within one to four years. The other terms of release vary from lender to lender.

As a cosigner in a student loan, there is a risk. If the borrower does not make payments, you will be the one to cover them. Late repayments also affect your credit. Therefore, make sure you sit down with the borrower, know him or her and agree on terms of your cosigning relationship.

As you search for the best student loans online, you need to understand the following terms.

Loan limit

Both private and federal loans have a limited amount of money you can borrow. With a federal loan, your limit will be determined by whether you are a dependent or independent student. If you are in graduate or professional school, the amount of money to borrow will be higher for the obvious reason that tuition fee at these levels is higher. Whatever loan limit a lender offers, just borrow what you need.

Loan consolidation

Loan consolidation is applicable when you acquire several student loans. It eases payment and lowers rates. The best student loans bank should be able to consolidate a private and federal loan. Nonetheless, loan consolidation only works after completing school. Before deciding to consolidate, remember you will miss federal offers, for instance, lower interest rates, forbearance and loan forgiveness. The consolidating entity pays your loans then gives you new terms and rates.


You are given forbearance if you are facing financial hardship. The lender allows you to pay less than the full amount. However, interest keeps accruing and there are penalties if you do not pay within the forbearance period.

Help and support

The best student loans provider is available for customers. The lender should quickly attend to your concerns about your account and payment. Look out for support avenues such as chat services, phone, and email on lender websites.

Paying back loans

There are three ways for paying your lender. You can pay after graduating, pay interest while still in school or pay the principal amount plus the interest when in school.


Student loans are helpful. However, it is important to keep in mind the amount you need and select the best student loans to cover your tuition fees.

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