There are different types of financial aid given to students who wish to pursue higher studies out of which consolidated college loans, provided by various banks and lending agencies are the most popular.
These loans are different from scholarships provided by universities, governments, and private organizations, to bright students, as they have to be paid back and usually with interest. There are many varieties of consolidated student loans. For example:
Student Loans Provided by Federal Agencies:
These loans are provided to the student directly and no payment is required at least till they are halfway through the course. A 6 month grace period is added to this at times if the student is unable to meet the half-time requirement, but this is done only once. The amount of these loans is also limited to a great extent.
Student Loans Provided to the Students’ Parents
These loans have much higher amount limits, but the payment installments are started immediately.
Loans Provided to Students and Their Parents by Private Organizations
These loans have higher limits. Although the interest is calculated from the time that the loan is sanctioned, no payments are required to be made until after the completion of the curriculum.
These loans can be used for any kind of expenses related to the subjects being studied. For instance, tuition fees, rooming and boarding charges, books, clearance of balances which are past due, computers, scientific and laboratory equipment etc.
Private loans are often used as supplements to federal student loans. This happens when the amount required for the expenses involved in higher education curricula is not sufficiently or completely covered by the amounts provided by federal loans, scholarships, grants and other financial aid available to students pursuing higher education.
Federal Student Loans:
This loan is directly provided to the college and University going students. These loans often act as supplements to the personal as well as family financial resources and other forms of financial aids including scholarships and grants.
They are available at both subsidized as well as unsubsidized rates of interest, as per the financial requirement of individual students. Both of these types provide a six month grace period during which no payments are required.
The loans provided to the students’ parents are also called PLUS loans (Parent Loan for Undergraduate Students). The amounts authorized in these types of loans is higher than the loans provided to students directly and usually cover the complete expense involved in the course.
But the payments have to start immediately and grace periods are not allowed. The parents and not their ward for who they are taking the loans are held responsible for payments. Nonpayment will affect their credit ratings.
The consolidated student loans given by private organizations are either school-channeled or provided to the student directly. The school channel loans are given directly to the college or university. Whereas the loans provided to the students directly, only require a proof of enrollment and the school is not involved at all.