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Good News for Students:
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| Federal student loans offer an excellent way of paying for tuition without the heavy burden of immediate repayment and high interest rate of credit cards. Low-interest Federal student loans are a great option for financing tuition. If you have financial need, you are probably eligible. And you may be able to have the interest deferred while you remain in school. |
So what's wrong with using a credit card? Almost all loans and credit agreements require a student to pay additional costs on top of the original amount borrowed. These costs generally include interest, finance charges and fees. Unlike student loans, however, credit cards do not allow you to spread the amount you owe over a fixed period of time. Repayment begins immediately, and a high balance can become more difficult to manage when student loans become due as well. Additionally, student loans can be acquired with interest rates at A FRACTION OF THE COST OF CREDIT CARDS.
According to Nellie Mae, a student loan lender, more than 83 percent of undergraduate students have at least one credit card, while 96 percent of graduate students carry an average of six credit cards.
The use of a credit card is expensive, especially if you carry a high balance and pay only the minimum required monthly payment.
The average student credit card balance is $2,347. Graduating students have an average of $20,402 in combined education loan and credit card balances. Sixteen percent, or $3,262 of that debt, is from credit cards. Graduate students carry balances of more than twice that amount.
Federal Stafford Loans are low-interest loans that are available to undergraduate and graduate students. Subsidized Stafford Loans are based on need, and the federal government pays the interest while you are in school at least half time and when you qualify for an authorized deferment.
Unsubsidized Stafford Loans still carry a low interest rate, but they are not need-based. You are responsible for interest that accrues while you attend school. A Federal PLUS loan is a parent loan to pay for the annual education of a dependent child enrolled in school at least half time.
There are many advantages to a student loan. Federal education loans do not have to be repaid until you leave school and following a grace period. You may also qualify to have a portion of your federal student loans canceled or forgiven if you work in certain professions. Taxpayers also may deduct up to $2,500 of the student loan interest they pay each year, including voluntary interest payment.
For more information on scholarships and loans, please call the EMU financial aid office at 487.0455.
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