Three different types of loans available are:
With a subsidized Stafford loan of $20,000 with a rate of 3.4% it will take 20 years to pay back the $20,000 and the $7,591.72 of interest.
- Stafford loans has two general categories, subsidized and unsubsidized loans. A subsidized loan is when the government will pay for the interest for you while you are in school. The interest rate on the loan is also going to be a bit lower with a subsidized loan. With an unsubsidized loan, you are going to have to pay for the interest that occurs while you are in school. If you do not want to make payments while you are in school, you can defer these payments until you are out of school. When you begin repaying Stafford loans, you will have several repayment options. You can choose a standard repayment plan, a graduated repayment plan or an income-based repayment plan. In order to get this type of loan, you have to be an American citizen and you cannot have any outstanding debts to the federal government.
- PLUS loans have a very low fixed interest rate. Another benefit of this program is that you can get a discount on your interest rate if you enroll in an automatic payment program and you can also deduct the interest that you pay from your taxable income. This could provide you with a nice tax break at the end of the year. This type of loans can be taken out by parents to pay for their child's education.
- Perkins loans is similar to the Stafford loan except that it is issued directly from the educational institution that you are attending. You have to be attending one of the 1800 educational institutions that qualify for this program. This loan is designed to help those that are in serious financial need. You will have to fill out a FAFSA and the government is going to determine if you are in desperate enough financial need. They will look at such things as your income, the income of your parents, and if your siblings are also in college.
- Stafford loans are compounded annually. In the subsidized loans, the interest is accumulated only after graduation and is usually about 3.40%. In unsubsidized loan, the interest is accumulated immediately after taking the loan and is set at 6.80%. Both interests depend on the date the loanI was disbursed and the education level of the student.
- PLUS loans are compounded monthly. The interest is accumulated immediately after taking the loan and is set at 7.9%.
- Perkins loans are compounded monthly. The interest is accumulate only ten months after graduation and is set at 5 % for the duration of the ten year repayment.
With a subsidized Stafford loan of $20,000 with a rate of 3.4% it will take 20 years to pay back the $20,000 and the $7,591.72 of interest.