student loan

An education loan is a form of financial aid that must be repaid, with interest. (Scholarships, on the other hand, do not have to be repaid.)

Education loans come in three major categories: student loans (e.g., Stafford and Perkins loans), parent loans (e.g., PLUS loans) and private student loans (also called alternative student loans). A fourth type of education loan, the consolidation loan, allows the borrower to lump all of their loans into one loan for simplified payment. A recent innovation is peer-to-peer education loans.

Federal law sets the maximum interest rates and fees that lenders may charge for federally-guaranteed loans. Nothing prevents a lender from charging lower fees. Many lenders offer a variety of student loan discounts to attract borrowers.

Few students can afford to pay for college without some form of education financing. Two-thirds (65.7%) of 4-year undergraduate students graduate with some debt, and the average student loan debt among graduating seniors is $19,237 (excluding PLUS Loans but including Stafford, Perkins, state, college and private loans), according to the 2003-2004 National Postsecondary Student Aid Study (NPSAS). (The median is $17,120. One quarter of undergraduate students borrow $24,936 or more, and one tenth borrow $35,213 or more.) For federal student loan debt (excluding PLUS Loans), the figures are 62.2% and $17,036. Average cumulative debt increases by about 3% or approximately $550 a year. When one includes PLUS loans in the total, the average cumulative debt incurred is $21,899. (Approximately one in ten (10.8%) parents borrow PLUS loans for their children's college education, with a cumulative PLUS loan debt of $16,317.)

The following table shows the percentage of students borrowing and average cumulative debt per borrower (excluding PLUS Loans) according to type of educational institution.

	Undergraduate Education Debt
Institution Level & Control	Percent Borrowing	Cumulative Debt
Overall Total (4, 2 and <>	55.5%	$15,766
4-year Total	65.6%	$19,202
4-year Public	61.7%	$17,277
4-year Private Non-Profit	72.8%	$21,957
4-year Private For-Profit	87.3%	$28,138
2-year Total	37.4%	$9,897
2-year Public	33.2%	$9,387
2-year Private Non-Profit	69.1%	$12,326
2-year Private For-Profit	90.0%	$12,107
<>	67.1%	$7,271
<>	34.0%	$7,243
<>	26.5%	$4,854
<>	77.3%	$7,311

Graduate and professional students borrow even more, with the additional debt for a graduate degree ranging from $27,000 to $114,000. The following table shows the percentage borrowing and average amount of cumulative debt per borrower among graduating students according to degree program. It provides the amounts borrowed for just the graduate education and also the combined totals for undergraduate and graduate education.

	Graduate Education Debt		All Education Debt (Grad & Undergrad)
Graduate & Professional Degree Programs	Percent Borrowing	Cumulative Debt	Percent Borrowing	Cumulative Debt
Total	60.1%	$37,067	70.1%	$42,406
Master's Degree	58.4%	$26,895	69.3%	$32,858
Doctoral Degree	51.0%	$49,007	58.3%	$53,405
Professional Degree	86.5%	$82,688	88.4%	$93,134
MBA	53.0%	$35,525	63.6%	$41,687
MSW	76.5%	$27,136	81.0%	$37,029
PhD	40.0%	$36,917	46.8%	$41,540
EdD	53.4%	$49,050	65.7%	$47,725
Law (LLB or JD)	87.7%	$70,933	89.7%	$80,754
Medicine	95.0%	$113,661	95.0%	$125,819

Grants, scholarships, work-study and other forms of gift aid just do not cover the full cost of a college education. Many students find that they must supplement their savings with government and private loans. The Federal education loan programs offer lower interest rates and more flexible repayment plans than most consumer loans, making them an attractive way to finance your education. You can also deduct up to $2,500 in student loan interest even if you don't itemize deductions on your income tax return.

The interest rate on the Stafford Loan for new loans first disbursed on or after July 1, 2006 is a fixed rate of 6.8%. The same rate applies to the in-school, grace and repayment periods. (A lower interest rate is available on subsidized Stafford loans for undergraduate students for loans first disbursed on or after July 1, 2008 through June 30, 2012. The rate in 2008-09 is 6.0%, then 5.6% in 2009-10, then 4.5% in 2010-11 and 3.4% in 2011-12 and returning to 6.8% for new loans in 2012-13 onward.) The interest rate on new PLUS Loans first disbursed after July 1, 2006 is a fixed rate of 8.5% in the FFEL program and 7.9% in the Direct Loan program. The interest rates on existing variable rate Stafford and PLUS loans will continue to change annually on July 1, based on the last 91-day T-bill auction in May. The current interest rates on the Stafford Loan are 3.61% during the in-school and grace periods and 4.21% during the repayment period. The current interest rate on the PLUS Loan is 5.01%. FinAid recommends that students who have not yet consolidated their variable rate loans consolidate them now to lock in the current low rates. Interest rates are expected to start increasing again in 2009-10. Borrowers may be concerned by the possible impact of the subprime credit crisis on the cost and availability of federal and private student loans. Federal loans will remain available, although loan discounts will likely be reduced significantly. A higher minimum balance may be required to consolidate. Private student loans will likely have stricter eligibility restrictions, requiring a higher credit score or a cosigner. There may be increases in the interest rates and fees on private student loans. Lenders will encourage borrowers to make payments of interest while they are in school.

Many student loan providers offer low cost government and private loans with consistently high quality servicing and flexible repayment terms. Citi Student Loans is one of these lenders. FinAid maintains a list of education lenders, guarantee agencies, servicers and secondary markets who offer federal and private student loans, as well as advice on preferred lender lists and choosing a lender and tips on identifying the lenders that currently hold or service your loans.

Loan forgiveness programs (in which the borrower's loans are paid off in exchange for volunteer work, public service or military service) offer an option for easy repayment. If you are having difficulty repaying your education loans, see Defaulting on Student Loans before you decide to skip a payment. It offers you some alternatives. Loan Cancellation and Discharge Forms can be found on the US Department of Education web site.

Also, FinAid provides numerous calculators that can help you better understand your borrowing options. The loan calculators offer estimates of monthly loan payments, estimates of the amount of debt you can afford to repay, an analysis of the cost of capitalizing the interest and tools for comparing loan costs.

Use FinAid's Student Loan Checklist to keep track of your student loans.

Some students, because they do not have prior experience with debt and loan amortization, do not appreciate how much their loans will cost them. FinAid provides some tips concerning calculating the cost of interest.

A fair deal for your Business!

Have you taken a moment to consider whether the current banking arrangements for your business offer the best value? Have you ever felt that maybe your charges may be too high or that the interest charged on your loans or overdrafts may not be competitive?

It is a well publicised fact that it takes the average business at least 14 hours of shopping for the best deals if they intend to switch bank. Charges are often complex and confusing and many business owners simply cannot spare the time.

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Alternatively, if you would like to call us direct, please feel free to contact us on 0845 8686507 to speak to one of our consultants.

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Life Insurance

There are few certainties in life, one such certainty is the fact that sooner or later we all die. Understandably, a lot of people do not like to think about this subject. Normally, people only think about the consequences of death after it has happened, at which time it is too late.

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Once you have answered these questions you will, more than likely, be concerned that you need to arrage to have some form of financial protection in place to protect yourself and your family.

Car Loans

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Want to Become Credit Card Savvy? Just Follow Five Simple Steps

Credit cards are a necessity in today's world. The good thing about credit cards is that they let you make purchases, when cash isn't an option. The not-so-good thing: They tempt you to impulsively charge items you don't really need. Keep in mind that every time you use credit cards, you're borrowing money. So think of credit-card debt as a high-interest loan, and consider these five smart ways to use credit cards.Shop Around
Shop around. With hundreds of credit cards to choose from, it's smart to shop for the best deal--a card with no annual fee and a low APR (annual percentage rate)--advises a financial consultant of a credit repair company in New York, often dramatically, particularly if you make one late payment.

If you plan to pay your bill for credit cards in full each month, look for a low annual fee and a long grace period--the time between the statement date and the payment-due date in which you'll avoid finance charges. If you plan to carry a balance, go for the lowest interest rate. Also look for a low rate on cash advances.

There are a lot of credit cards that offer great rewards and benefits. Usually there are some annual fees attached to credit cards that have great rewards. However, these rewards may outweigh the annual fee significantly so you will still save even though there is an annual fee attached to that credit card. Some credit cards offer great rewards and no annual fees. I have picked several great credit cards with no annual fees that offer excellent rewards and high credit limits. You should pick a card with reward that you think will be most appropriate for you, so you can save. If you pay your balance in full each month then the APR interest rates will not apply to you, so you should ignore it. The most beneficial credit card will be the one that has rewards and no annual fees. Also, look for a credit limit when applying for a no annual fee credit card. Annual fees are usually low; they range from $20 to $100, so a credit card that has great rewards and has an annual fee may be more valuable to you then a credit card with no rewards at all and no annual fee.

Improve Your Credit Record
A credit report is a snapshot of your debt-paying activity; your credit (FICO) score--a number from 350 to 850--predicts whether you're a good credit risk (above 620 is considered respectable). The higher your score, the better your chances of getting a low interest rate on credit cards, car loan or mortgage. Charging near the limit or maxing out credit cards can lower your score, Martin says. Get a copy of your credit report at least yearly from the three major credit bureaus (Equifax, Experian, Transunion). You should challenge if there is any error. Under a new law, by September 2005 all consumers will be able to get a free credit report.

Restrict The Number Of Cards
A wallet filled with credit cards (which represent money you owe or can borrow) may work against you, when you apply for a loan or mortgage. Two or three credit cards are enough, Martin says. If your credit report indicates you already owe or can access a great deal of money, potential creditors may determine that added debt could strain your ability to repay.

Switch Balances Cautiously
If you transfer your high-interest balances to a low-interest credit card, be aware that the low rate may last for only a limited time, and that many credit card companies assess transaction fees, sometimes up to 4% of the amount transferred. Avoid credit cards that charge hefty fees, which may outweigh any savings offered by a lower interest rate. Scrutinize the application or call a company representative and ask about all charges before signing up. Once you transfer the debt, stop using the old card.

Avoid Credit Pitfalls
Despite the benefits of using credit cards, there are pitfalls that accompany. It can be costly, with some interest rates higher than 25% and whopping annual fees, finance charges and penalties that can jack up the purchase price. And you risk spending more than you can pay. Calculate how much you can afford to charge each month and then put your receipts in an envelope and keep a running total on the outside. Once you reach your limit, put away the plastic.

Types of Debt Consolidation Programs for People with Bad Credit

If you are in debt and each month you find yourself farther and farther behind on your payments, you may feel as if there is no way out. Luckily there are many companies out there who can help you get out of debt now and teach you how to stay out of debt in the future. The most common way to get relief from your mounting credit card debts and loans is to use a debt consolidation service.

Most credit counseling services can help you consolidate your debt into one monthly payment. You will no longer have to worry about forgetting a payment, and falling further into debt, when all of your debts are rolled into one easy payment. On top of this, most credit counseling services are able to work with your creditors to make sure that you are paying the lowest possible monthly payments and often times your debt consolidation loan will have a lower interest rate than your high interest credit cards.

The most common way to consolidate your debt is to take out a home equity loan. By utilizing the money you have already paid towards your home, you can pay off high interest credit card debts before you get charged more late payment fees and over the limit fees. Home equity loans are usually much lower interest then credit card interest, or auto loan interest. The key to getting a great rate on your home equity loan, and achieve your first step towards debt consolidation, is to be proactive. The better your credit the easier, it will be to get a home equity loan and you'll get a better interest rate, too.

Unfortunately many people don't realize they are in trouble with debt until they already have bad credit. Others who have bad credit and mounting debts don't have a home or don't have enough equity in their home to pay off all of their debt. Even if you find yourself in one of these categories, you can still get relief from your debt. In many cases even non-homers with bad credit still qualify for unsecured debt consolidation loans. These unsecured loans will not have terms that are as favorable as a secured debt consolidation loan, like a home equity loan, but they may be the thing you need to get relief from your mounting credit card crisis.

As with many debt relief options, the key to getting out of debt quickly and easily is to find a great credit management company to help you do it. There are, unfortunately, many less than legitimate companies out there that prey on people with bad credit. You should never feel as though your credit situation has left you with no options to get relief. Even people with bad credit can be helped by a reputable credit counseling company.