Times are tough. Credit is tight. Unemployment is at an all-time high. Student loans are critical as well due to defaults because of lack of employment and job losses. Anything worthwhile just doesn’t come easy anymore.
If you think differently, you may not be from this world. If not for government intervention and support, student loans would be hard to come by as well, engendering thousands of out-of-school college youths.
And so you ask, “Why are there so many spam messages in my email offering low-interest student loans with no cosigner, even if I have bad credit record?”
Well, that’s what they are – spam, predatory lenders you should avoid and run away from. They will charge you with variable and high interest rates. They won’t make life easy for you.
Life’s Changes
Life today is far different from what it was not too long ago, around 10 years ago when jobs were easier to come by and credit was more relaxed. Today’s job market is shrinking and is more demanding. When jobs are tight, a high school diploma does not carry much weight for most entry-level jobs. A university degree is required for most, if not all, well-paying blue chip companies offering more incentives and benefits.
The logical conclusion, of course, is that you need to obtain a college education. Unfortunately, tuition fees and other college expenses are not exactly that affordable for most people in the United States. With many parents losing their jobs, college education is also taking a beating from students who forced to default on their loans and from some student loan companies forced to give up the business.
However, giving up your dream to earn a college education should not be an option even in the midst of this scenario. The federal government doesn’t think so either, and has budgeted billions of dollars to support the dream of every eligible American to earn a college degree across every county and state.
No Easy Loan
To be honest about it, there’s no such thing as an easy loan. Anything that you spend outside your regular income is not easy to pay back. It’s the same thing with student loans. It’s something you borrow now which you should repay in the future, usually after four years.
If you’re a freshman, taking out a student loan is not easy. A loan worth thousands of dollars may not even be within your realm of reality and experience. After all, you’ve so far been spending money from the pockets of parents, who don’t expect to be repaid.
A student loan is a special loan. You’re not expected to repay it in a week, or in a few months. If you’re taking up a four-year course, you’re given up to four years to repay your student loan because you’re expected to be gainfully employed by then. A student loan is your pass to a stable environment and a better future.
But what if you’re not employed after four years, or even after five?
For many students who graduated five years ago, this is no longer a rhetorical question. A good number of them is still unemployed and have no means to pay off their student loans for now.
Many private student loan lenders have been forced to close shop because of unpaid loans. Graduates numbering in the hundreds of thousands are out of job and have declared themselves in “extreme economic hardship.”
Many students who availed of federal student loans can consider themselves lucky compared to those who took out private student loans. These graduates enjoy relatively lower interest rates and other benefits provided by federal loans.
We can also refer to them as easy loans, relatively speaking, for the following reasons:
Need-based Student Borrowers
Student loan amounts and beneficiaries are determined according to the financial needs of loan applicants, not their creditworthiness. They are determined through the FAFSA, a student loan application process that can easily be accessed through the internet.
The FAFSA form allows federal loan evaluators to determine the applicant’s family contribution and select the best loan package for the applicant.
The usual choices are Perkins, subsidized Stafford, and unsubsidized Stafford. The primarily objective of these loan programs is to ensure that every eligible American student loan applicant get a fair share of the multi-billion dollar loan package from the government.
Subsidized and Low Interest Rates
Aside from actual grants given to deserving and extremely needy students, federal loan money has also been set aside for students who can barely afford college education.
Known as Perkins, this loan package is available to low-income students and has an interest rate of only 5% annually. Since interest charges start soon after the release of the loan amount to the borrower, Perkins provides a subsidy to the students by absorbing all interest charges while they are still in school.
Easy Repayment Term
The federal government allows graduates up to six months after graduation to find employment and start repaying the loan. In case you fail to find a job within six months, or you find yourself in “extreme hardship,” you can request for determent or temporary suspension of loan payments for a certain number of times with no-interest charges. However, you look at, it’s help at the most opportune time.
This is one of the benefits of federal loans. You cannot find anything like this in private student loan programs. If you secure your loan from a private student lender, you should expect a collection letter from your lender a few days or weeks after graduation. And a threatening demand letter after a month. Then, come your worst nightmare – a garnishment order instructing your employer, if you’re employed, to set aside a part of wage to pay off your loan. A garnishment is bad not just for your paycheck, but for credit as well.
Perkins and Stafford loans are two of the most loan programs of the government primarily because of their easy application and approval process and their easy repayment plan, specifically their policy of giving more time to graduates to find work in their area specialization before they are asked to make the repayments.
Loan Forgiveness
This is the ultimate charmer of the government’s student loan program – loan forgiveness. Under certain conditions, your student loan may be canceled by the government under a program called “loan forgiveness.”
These conditions include serving in the following organizations:
1. Volunteer work with Americorp, Vista, and Peace Corps
2. Military service
3. Teacher for low-income families
4. Service in public interest and non-interest positions
Working under these circumstances do not immediately qualify you for “loan forgiveness,” so you’re not advised to stop paying your student loan even if you’re working for them already. Common sense dictates that you should inquire from the human resources department of your organization and ask if you qualify. If you do, you will be advised accordingly.
Loan forgiveness or cancellation varies with each organization. If you work for Peace Corps, for example, you can earn 15% loan discount for each year of service. You’re entitled to a maximum of 70% after more years of volunteer in developing countries across the world.
If you become a full-time teacher in an elementary or secondary school serving students from low-income families, you can be forgiven 15% of your loan in your first two years of service, 20% in the next two years, and 30% in the your fifth. As such, your loan is forgiven after five years. However, you need to contact your school district to confirm which schools are eligible.
There are many benefits in working for the military. If you have an existing federal student loan, you can request for a leave during your call of duty and resume your studies later. Once again, you have to contact your HRD to confirm your eligibility. Not all services of the Armed Forces are included in the program.
Easy Private Student Loans?
By and large, private student loan lenders cannot match the government’s easy and convenient loan features, including accessibility of the loan, flexible repayment terms, and loan forgiveness or cancellation incentive.
After the recent credit crunch, private lenders continue to feel the pinch of unpaid student loans. The number of active student loan providers has, likewise, dwindled considerably, still unable to recover from the mass student loan defaults that transpired in recent years. The government has to move in to avert their collapse, providing them guarantee against loan defaults and recovery of interest to ensure their viability.
Private lenders may no longer recover their original role as major student loan providers, but some of them may still try to pull a few tricks to entice some students to use their services. Well, some of them may really be worth the try. After all, they can really afford to lend amounts higher than those released by the federal government.
Beware though. What is easy from private lenders may not always be easy on your pocket. Don’t make it easy for them at your expense. Study your options well.
Calleigh Queenan currently writes for vacuum cleaner reviews, an online reviews created to share her honest opinions based on hands-on experience on products. Calleigh is a stay at home mom and enjoys offering her tips on Hoover vacuum Reviews.
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