Student loans are anever-ending source of confusion - both for students and their parents. Bernard Sena, for instance, asked, "If I get a student loan, will I start repaying it after my son finishes college?"
It all depends on the type of loan and the specific terms. The first thing to decide is whether the parents are taking responsibility for the loan or whether the student is paying for his own education. Once that decision is made, weigh the options based on your family's financial situation.
Federal Perkins Loans are offered by participating schools to students who demonstrate the greatest financial need. In addition, the U.S. Education Department administers the Federal Family Education Loan program and the William D. Ford Federal Direct Loan Program. Both programs consist of what are generally known as Stafford Loans (for students) and PLUS Loans (for parents).
Generally speaking, students aren't required to start repaying their loans until they graduate, drop out of school or cut back to less than half-time enrollment. In addition, students usually have a grace period of six to nine months before the first payment is due.
During the grace period on a subsidized Stafford Loan, you don't have to pay any principal, and no interest will be charged. The federal government pays the interest for the student. However, that's not the case with unsubsidized loans.
No principal payments are required during the grace period on an unsubsidized loan, but interest is still charged. You can pay the interest as it becomes due or else the lender will add it to the outstanding principal balance.
When parents take out an education loan on behalf of their children, there is usually no grace period. The first payment on these loans is generally due within 60 days after the final loan disbursement for the period of enrollment for which the parents borrowed. In other words, the repayment starts while the student is still in school.
Asa Aarons is a consumer reporter who appears on "News 4 You" at 5:30 p.m. weekdays on WNBC-TV, Channel 4. His special Daily News column appears Mondays, Tuesdays, Thursdays and Fridays. Send your questions to Ask Asa, P.O. Box 3310, New York, N.Y. 10116 or e-mail him (AskAsa@gmail.com). Questions can be answered only through this column.Labels: academy awards, career training, education online, financial aid, free education, high school, scholarship, student loans, study abroad |
