Federal education — pros and cons
When you look for student loans the first choice would be to look up federal education student loans or William D Ford Direct Student loans. This is a provision by the US Government that helps students avail of the required fund without using banks or regular financial organizations. There are advantages and disadvantages attached to this type of loan, and before you decide, you should be aware of both the sides.
Let us see the disadvantages first. The most obvious disadvantage about federal education student loans is that these cover only the tuition fees. This is why most students feel compelled to find financial help from private sources to take care of expenses related to equipment, room rent, boarding and other such expenses.
A second disadvantage is that the federal education student loans have watertight eligibility criteria, and unless the student matches these completely, they cannot avail of the loans.
The advantages however are many. The interest rate of the federal education student loans is much lower than any other bank or financial institution. This means you save quite a tidy sum over the time you have to repay the loan. The processing of these loans is easy and fast, unlike some banks.
Another advantage is that these loans come with a grace period of six months, time within which the new graduate would be able to find work mode of consolidating his or her loan. Banks require that the loans be repaid soon after disbursement, which could be troublesome for both parents and students. With federal education student loans, you have the liberty of paying only the interest amount while studying, which would lessen the total burden after the graduation.
The third advantage is that the federal education student loans do not depend upon credit records. This is a major problem when the student applies with formal financial organizations since a student would not have had the time to build a credit record at the time of loan application. This hurdle is crossed by using a co-signer for the loan. The co-signer in this case, should have not only impeccable credit record but also collateral that covers the loan amount.
Looking at the plus and minus of the federal education student loans one thing is very obvious. All students who are eligible to avail these loans should take advantage of it. The difference is the funds requirement may be met through other sources. In this way, the student would be able to reduce his or her financial burden when they graduate.