Student loans: Stafford is a good bet - Los Angeles Times
What do you do if the 2008 forefather market plunge ravaged your child's college account and you don't have time to build it back up? It may be dated to figure out a borrowing plan.Parents of many college-bound seniors are in the throes of contingency planning because the supermarket's swoon left them with far less than they expected.
Those who have enough for this year but not subsequent years might be tempted to cash out what's red of the college money and worry about the rest later.
But that could be a costly mistake, said Lynn O'Shaughnessy, creator of a book and a blog called "The College Solution."
That's because it's cheap to borrow a portion of education using government programs, but if the amounts get too high you might have to turn to private lenders, whose interest payments can get indeed expensive.
If you need to borrow, it might be smarter to borrow a little every year, conserving enough savings and hard cash flow to ensure that you are never forced to borrow at high rates.
To understand how to set up a borrowing intend, you need to know that there are four different types of student loans that are readily available to almost everyone.
Subsidized Stafford loans are low-expenditure, government-guaranteed loans available to students with need.
Unsubsidized Stafford loans are government-guaranteed loans close by to all students.
PLUS loans are government-guaranteed loans made to parents.
Private or signature loans are not guaranteed by the rule and can be issued at rates as high as 20%.
There are additional loans -- some provided by schools to students with necessity -- but if you qualify for these, the school will have included them in your financial aid award letter.
The two best options are the federally guaranteed schoolgirl loans named after the late Sen. Robert Stafford (R-Vermont); however, there are annual caps on how much a person can sponge from the Stafford program.
Subsidized Stafford loans are given to students who demonstrate some "need" according to fiscal aid formulas. The interest rate on this loan varies, but for the 2009-10 school year, subsidized Staffords are issued at a 5.6% inflexible rate. Next year the rate will be even lower -- 4.5% -- thanks to financial aid legislation passed last year. In 2011, it will subside to 3.4%.
What makes subsidized Stafford loans even more attractive is that the government pays the interest while the student is in school. So if your freshman takes out a $3,500 subsidized Stafford advance, she will owe $3,500 in 2013 when she graduates.
With other types of student loans, the student doesn't need to pay interest while in style, but the interest accrues. At the same interest rate, $3,500 borrowed for freshman year would grow to more than $4,300 by graduation.
The amount a schoolboy can get in subsidized Stafford loans varies based on how close she is to graduation. The maximum is $3,500 for
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