Education loans come in three major categories: student
loans (e.g., Stafford and Perkins loans), parent loans (e.g., PLUS loans) and
private student loans (also called alternative student loans). A fourth type of
education loan, the consolidation loan, allows the borrower to lump all of
their loans into one loan for simplified payment.
Federal law sets the maximum interest rates and fees that
lenders may charge for federally-guaranteed loans. Nothing prevents a lender
from charging lower fees. Many lenders offer a variety of student loan
discounts to attract borrowers.
Few students can afford to pay for college without some form
of education financing. Two-thirds (65.7%) of 4-year undergraduate students
graduate with some debt, and the average student loan debt among graduating
seniors is $19,237 (excluding PLUS Loans but including Stafford, Perkins,
state, college and private loans), according to the 2003-2004 National
Postsecondary Student Aid Study (NPSAS). (The median is $17,120. One quarter of
undergraduate students borrow $24,936 or more, and one tenth borrow $35,213 or
more.) For federal student loan debt (excluding PLUS Loans), the figures are
62.2% and $17,036. Average cumulative debt increases by about 3% or
approximately $550 a year. When one includes PLUS loans in the total, the
average cumulative debt incurred is $21,899. (Approximately one in ten (10.8%)
parents borrow PLUS loans for their children's college education, with a
cumulative PLUS loan debt of $16,317.)
Many student loan providers offer low cost government and
private loans with consistently high quality servicing and flexible repayment
terms. Citi Student Loans is one of these lenders. FinAid maintains a list of
education lenders, guarantee agencies, servicers and secondary markets who
offer federal and private student loans, as well as advice on preferred lender
lists and choosing a lender and tips on identifying the lenders that currently
hold or service your loans.
Loan forgiveness programs (in which the borrower's loans are
paid off in exchange for volunteer work, public service or military service)
offer an option for easy repayment. If you are having difficulty repaying your
education loans, see Defaulting on Student Loans before you decide to skip a
payment. It offers you some alternatives. Loan Cancellation and Discharge Forms
can be found on the US Department of Education web site.
Also, FinAid provides numerous calculators that can help you
better understand your borrowing options. The loan calculators offer estimates
of monthly loan payments, estimates of the amount of debt you can afford to
repay, an analysis of the cost of capitalizing the interest and tools for
comparing loan costs.
