College Crunch

Anyone who has attended college or is in the process of signing up to attend knows how important student loans can be. If you go to school full-time, unless you come from a wealthy family, there is simply no easy way to make payments each semester directly to a school to pay for your classes, books, and needed learning materials. Student loans ease this burden by paying for all of your classes upfront each semester with the understanding that you will pay them back in monthly installments beginning around six months to a year after graduation. Currently, you can get two types of student loans and these are subsidized and unsubsidized.

Subsidized loans are given depending on certain qualifications that mainly deal with your income and the income of your parents. These loans have their interest paid by the government while you are attending school and for six months after you graduate. Unsubsidized loans are pretty much the same except the government doesn’t pay the interest. You are responsible for that and it will accrue while in school. It’s a great idea to pay down unsubsidized loans whenever possible.

President Obama is pushing a proposal that will change student loans beginning in 2010. Right now, students are able to get student loans from all kinds of different lenders. Many people will go to their own banks, and having all of your finances managed in the same company can be easier and more efficient. The current student loans people have are guaranteed by the government and their rate of interest won’t change based on rates determined by Congress.

The new proposal wants to eliminate the use of private lenders completely so every student loan will come directly from the government. Private lenders will probably still offer student loans but their interest rate won’t be guaranteed and may fluctuate with the economy. That has a lot of people worried. Students don’t really pay much attention to this because they are usually happy to have the money no matter where it happens to come from but those interest rates could take a heavy toll on you after graduation if you don’t pay attention to them.

Let’s face it, when you are ready to pay for college, where that money comes from isn’t the important part. We are all concerned with how much we are going to get and if it will be enough. The Obama plan is actually good news for students. The total amount of the Pell Grant is going to rise with inflation so we will see an extra $800 or so given to qualifying students. The total amount of loans available will drastically increase as well. This proposal will also make loans available at every college and university in the entire country and the total amount of loan money available will rise from $1 billion to $6 billion dollars per year.

To get down to the real facts of this proposal. Students are going to benefit no matter where they are attending school or plan on attending school. With extra money coming from grants and loans, students will be able to take more classes per semester and have the ability to graduate sooner. This is especially important or older students with families who couldn’t afford to take too many classes at once because loans just wouldn’t quite cover everything.

The best advice you need to remember when it comes to student loans is simple: don’t take more than you need. It’s easy to see that you are approved for $5000 when you only have $3500 in expenses but you should only take what you need for books and necessary expenses. Remember, you DO have to pay this money back.