Fixed Rate Student Loans
It is time for college, so you and your family must have arranged for funds for your college expenses. If your family resources are not enough, then don’t forget to apply for federal financial aid by submitting your Free Application for Federal Student Aid (FAFSA), preferably online. You may receive aid in the form of grants, work-study schemes, and loans such as Stafford loans. Stafford loans are one of the most popular student loans among college going students as they’re not only the prime examples of fixed rate student loans, but they also have easy repayment terms and low interest rates.
About Fixed Rate Student Loans:
So, what are fixed rate student loans? As the name implies, they have fixed interest rate; the interest rate is known when you apply for the loan. It stays the same throughout the duration of the loan, and your repayment amount is not affected by the condition of the economy. So, there are no surprises in store for you when you graduate and start repaying your loan after your grace period ends. Until recently, fixed rate student loans were the domain of the government, but now some private financial organizations have also started offering them.
Federal Fixed Rate Student Loans:
The Stafford Loan with interest rate 3.4 % is for undergraduate students displaying financial need on their FAFSA whereas an interest rate of 6.8% is charged on the loans borrowed by graduate students and undergraduate students with no need for financial assistance; the need for financial assistance is calculated using a formula devised by the government. Moreover, students with financial need are also given the subsidized version of loans; their interest during college and grace period is paid by the government.
Private Fixed Rate Student Loans:
Some private organizations like the US Bank and Wells Fargo have also started offering private fixed rate student loans. However, you still require a cosigner with a clean credit history to not only ensure approval for the loan but also get lower interest rate. The interest rate can be skyrocketing high if you don’t bring a cosigner, and as it is fixed, so it stays the same throughout the duration of the loan. Moreover, even if you arrange for a cosigner with an excellent credit history, the interest rate on these loans is more than even the higher end of the Stafford Loan, i.e., 6.8%.