Low Interest Student Loans: Learn the Financial Benefits of the Stafford and Perkins Loan

The key to a successful college career is largely based on proper decision making and responsibility. When taking out a student loan, many of the same things apply. With the availability of low interest student loans, a college student can worry about the books…rather than the bank.

Financial Benefits of Low Interest Student Loans

The most notable benefit of a low interest student loan is lower payments. With lower interest comes less payment, a shortened repayment period, and obviously more money for the student.

Another obvious advantage of the Stafford loan, and/or Perkins loan, is that a student can have his or her interest paid by the government while he or she is still in school. In some cases a student’s interest can be paid up to nine months after that individual graduates.

Stafford Student Loan

Simply put, the Stafford loan allows college students with very little credit or in some cases no credit to financially afford a college education. Stafford loans aren’t based upon an individual’s credit score, the loan is based on income. These loans are also based upon student enrollment (at least half-time), and if the student in question has ever defaulted on a loan in the past.

The Stafford loan has an interest cap. The interest rate for the subsidized Stafford loan is 5.6% and 6.8% for the unsubsidized Stafford loan

Obviously, many students opt for a subsidized Stafford loan. In this process, the government will pay for all interest while a student is enrolled in college at least half-time. This is another way the Stafford loan allows a student to focus on academics…and not educational finances.

With respect to the unsubsidized Stafford loan, the student has the option of paying the interest on the loan or deferring the loan. Deferred interest on an unsubsidized loan accrues with the principal, so it may be wise to make payments which are typically on a quarterly basis. The lender can provide more details.

Perkins Student Loan

The Perkins loan is considered an “exceptional need” based loan. Many students who qualify for this particular loan also qualify for the Federal Pell Grant. The Perkins loan and Federal Pell Grant are almost intertwined in respect to qualification. Chances are if a student qualifies for one, he or she will qualify for the other.

Similar to the Stafford loan, Perkins loans are also subsidized. Students will be encouraged to know the Perkins loan also has the longest grace period of any federal student loan. Meaning, the student doesn’t have to pay anything on said loan until nine months following his or her college graduation.

FAFSA and SAR

In order to understand these loans and have the opportunity to capitalize on federal student loans, the student is required to follow specific guidelines.

By filing the Free Application for Federal Student Aid (FAFSA), and submitting the application as soon after January 1 each year, the student can begin to understand where he or she stands. Each college will set a priority date for filing the FAFSA, and the student needs to be familiar with the date. The priority date is not a deadline.

Once the FAFSA is processed the student will be given a Student Aid Report (SAR). This report will provide the student with the proper dollar amount letting he or she know what is expected financially.

Within the following month the student will receive an award letter detailing which type(s) of financial assistance he or she has qualified for, and how much financial aid that individual will receive. The student will then be required to return the award letter stating which financial options he or she has chosen. Many colleges allow students to accept or decline the offer on the college website.

Once all the initial qualifications have been met, the student will be required to sign either a promissory note for the Stafford loan and/or Perkins loan. Entrance counseling is also required and is often done online.

Student Loan Education

Lenders expect students to be responsible when it comes to the basic understanding of loan responsibility. As with any loan, it’s important to understand the current financial condition before agreeing to something. Never sign anything without having the proper knowledge of what is being signed.