Few areas of credit are as complicated today as that of student loans. There are many types, with lots of terms, complicated conditions, and fine print. Fully understanding the options available is certainly an excellent choice in the long-run when having to fund an eduction.  It’s very important that students understand financial options so that they can use this information in the rest of their lives.

One of the most common options is a Stafford loan. Hundreds of thousands of students have used these as a means of partially financing their education and they do have some positive aspects.

The Stafford loan has no pre-payment penalty - you can pay off any remaining balance any time. The great thing is that no credit check is preformed meaning that just about anyone can qualify. There are no payments required while the student is taking courses, provided they maintain at least a half-time status. And, after leaving school there’s a six-month grace period during which no payments are required.

But there are limits on the amount that can be borrowed in one year. Also, though Stafford rates often look attractive relative to ordinary loans, they contain additional charges that can make the cost of borrowing higher. Up to 3% in fees (including a 2% Federal ‘origination fee’ and a 1% Federal default fee) can be applied.

Re-paying a student loan can seem a daunting task however there is the option to pay over a period of 10 years which makes things much easier. You might find this an attractive option because the monthy repayments ar low (in the following example you will see that it’s $116 per month). But the amount of interest accumulated on a 7% loan of $10,000 (and most students borrow more) over 10 years is: $3,933. This means that the interest paid is 39% of the original amount. Definitely, not cheap money.

Though it may involve beginning repayment immediately, many parents attempting to help finance their son or daughter’s education will find it worthwhile to investigate other alternatives. Even students should make an effort to look for other routes, including a combination of grants, scholarships, and conventional loans repaid with money earned from part-time work.

Don’t forget saving options because this is something that everyone should have no matter what your age. The risk with all such plans is that inflation, financial crises, and other unpredictable elements can cause that investment to be worth very little by the time it is needed.

Have a look at all the options available to you such as inflation-adjusted hedge funds and ax-free municipal bonds which can help to off-set any of those effects.  Don’t get too heavily into credit card debt or payday loans.

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