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Understanding Policies That Affect Your Student Budget

student-budgetThe high expenses that come with college education can get both students and their parents overwhelmed. Fortunately, financial aid can be obtained in the form of loans, grants and scholarships to cover tuition, board, books, transportation and other living expenses either partially or in full. Still, there are policies that affect your ability to access such aid, and there are also those which have significant impact on the terms of repayment. It is therefore important to understand these rules to be able to make the most of the available opportunities.

Eligibility for Federal Loans

Regardless of your financial situation or credit score, you can qualify for a federal student loan. Congress determines the rates and limits for these loans, meaning they are not impacted by any particular measures of risk, hence making them more reachable to everyone. When it comes to such loans however, undergraduates generally get lower rates whereas their graduate counterparts can borrow higher amounts. Further, students who cannot afford to fund their college education may receive subsidized loans where the government pays the interest to ensure that at the point of graduation, the student owes the exact amount they borrowed.

Interest Rates For PLUS Loans

In general, federal government loans accrue lower interests compared to private ones. With the changes that were made with regard to PLUS loans in 2013 though, borrowers are set to pay even lower interests over the long term. The rates will take the same direction as the financial markets and lock in for the entire duration of the loan rather than change every year. Brought down from 6.8 percent, a 3.86 percent rate currently applies to undergraduate loans while graduates need to pay 5.41 percent down from 7.9 percent.

Borrower Protection

If you ever have a hard time settling up your college debt, there are rules that will help you repay it and enable you to avoid default. Through rehabilitation, borrowers will be able to make nine affordable, on-time monthly payments and qualify for further financial assistance while avoiding a default on their credit report. Also as a borrower, if you have been delinquent for nine months as a minimum, you will be able to orally request forbearance to postpone your payments and evade default. However, this will only apply to federal student loans and none of those which are privately obtained.

Student Loan Repayments

Thanks to the Health care and Education Reconciliation Act, any student who gets enrolled into college from this year henceforth will handle reduced monthly payments while paying off their loans. The deductions made from their income will be no more than 10 percent. Also, if you choose to join the public service upon graduation, your outstanding debt will be forgiven after 10 years while other borrowers will have theirs absolved after a 20 year period.

Misconceptions about Student Loans

Some students erroneously believe that they shouldn’t request for financial aid until they have made it to their desired college. However, working on the FAFSA papers can actually be advantageous when done at the point of application. Also, even though some people think that only needy students can access financial aid, this isn’t accurate. Regardless of whether they are needy or not, students with good grades, outstanding athletic capabilities or other talents can access the resources as well.

Many factors impact your entitlement to a student loan. However, being unable to qualify one year doesn’t automatically disqualify you the next year. Having a sibling enroll into college or other changes on the financial situation of your family for instance, may work to your advantage and enable you to access the financial aid you need. Therefore, even when you think you may not be eligible, you should aim to apply for financial aid every year.

About The Author:

Today’s guest article comes from Ryan Ayers, a writer who creates informative articles in relation to education. In this article, he describe educational policies affecting students and aims to encourage further study through Masters in Public Administration Programs.

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One Response to “Understanding Policies That Affect Your Student Budget”

  1. andrew says:

    There is a lot of information out there about student loans but the best that I have found is right here. There are so many misconceptions about loans and the more we know, the better off we will be.