There is a definite hierarchy to the best undergraduate student loans that is expressed in several ways. In places like the US, the best loans always come from the government, instead of from private sources, because of lower interest rates and flexible repayment strategies. Better loans are usually subsidized, which means the government pays all interest while the student is in school at least half-time. A list of loans in descending quality could be expressed as the following: parent loans, subsidized federal undergraduate student loans, unsubsidized federal student loans, private loans without a cosigner, and private loans with a cosigner.
The reason parent loans that are either issued by a government or private lenders are at the top of the list is fairly evident. Students don’t repay parent or family undergraduate student loans. If a parent is willing to meet the costs of a child’s education, it certainly benefits the student. He owes less when an education is complete. These loans are, undoubtedly, best for the student, but are not always good options for parents.
The next best bet for undergraduate student loans are subsidized government loans. These don’t accrue interest while the student is in school, and they don’t require a credit report. In the US, amount of these loans is partly contingent on financial need, which means students with lower parental or personal income are likely to qualify for higher amounts. It’s important to note that many people who financially qualify for large loan amounts may also qualify for grants, and grants should be accepted first, before any loans are taken, to reduce total loan balance.
People may qualify for a combination of grants, and government subsidized and unsubsidized undergraduate student loans. The unsubsidized loan is usually the amount of money over what the state deems necessary for the student to pay for an education, based on the student or family’s finances. It also doesn’t require a credit report, but these loans accrue interest. While students are in school, interest payments are optional, but if they’re not paid, they add to the balance of the loan. Making interest payments could be advised to avoid this.
Undergraduate student loans of several other types are offered. Private loans very often require a cosigner, like a family member, because most students don’t have strong credit ratings. These frequently accrue interest and may require interest payments during school attendance. With a sufficient credit score, a student might be able to obtain these loans without a cosigner. Interest rates vary, but students should think of these examples as the last two types of loans to obtain. Government loans generally are better.
Many governments have loan repayment programs wherein participation can forgive student loans. Military service may offer loan forgiveness or college scholarships. Working in high need areas of employment after graduating is another way to get loans repaid. Students should gather information about these programs because they can be money savers, offering quick freedom from debt.
