Loan Processing Schools (Loan Processing Procedures)
It is no longer a choice to take out loans as financial aid for education. The cost of higher education is so high that almost no amount of gift aid will cover the entire cost of an academic program. Taking out loans is an absolute necessity unless you have a huge college fund or wealthy family members who will finance your education. Most of us have neither so understanding the loan processing schools’ procedures is an important part of your education. Think of it as ‘real world’ education because getting loans is a big part of real world living. You need to know how the loan processing schools work with you to get the best loan possible and how the contracts are worked out before you sign the promissory note.
Need Based Aid
The officers who work in loan processing schools prefer to handle the need based loan aid first. This generally comes in the form of subsidized loans that are issued by the federal government. These loans fall under the Federal Family Education loan program and include Stafford and Direct loan programs among others. Subsidized loans do not accrue interest while you are enrolled or in deferment or forbearance. These programs usually have a limited amount of funding and are issued on a first come, first served basis. The value of the loan tends to increase with each academic level you achieve so you need less supplemental loans as you reach your goal of completing your education.
Non-Need Based Aid
There are also federal loans issued to students who do not have significant financial need, but want to use loans to supplement their gift aid without the worry of making payments directly out of pocket during school. The officers that handle loan processing at the school will discuss with you the types of loans available from federal programs (like the Perkins loan) and from private lenders. These loans tend to be unsubsidized but typically have a fixed rate. The interest rates on these loans will be higher than the need based aid programs, but not so much that you will wish you actually had the financial need. The repayment options often include deferment and forbearance options with stringent rules.
Parent Aid
The parents of students who do not qualify for need based aid who want to supplement their child’s educational funding or are unable to make payments to cover the student’s needs can take out loans with the federal PLUS (Parent Loans for Undergraduate Students) program. This loan will require that repayment begin immediately but it benefits from the ability to immediately consolidate should you choose to do so.
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