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Things you need to know about student loans One fact of life for most college students is that they will have to take out students loans to help pay for their college education. Many times their parents will have to take out loans to help them. The Alabama Student Loan Program suggests that students and parents should take time to learn more about student loans and how to save money on them. FFELP includes Federal Stafford Loans and Federal PLUS Loans. Stafford Loans are available to undergraduate, graduate and professional students. PLUS Loans are available to the parents of undergraduate students and also to graduate and professional students who have received all the Stafford Loan funds for which they’re eligible. FFELP loans have a lender and a guarantor. The lender can charge an origination fee, similar to the points on a home mortgage, of up to 2 percent. The guarantor must charge a federal default fee of 1 percent. Those fees are deducted before the loan funds are sent to the student’s school. However, not all FFELP lenders charge the same origination fee, and some lenders will pay the federal default fee on behalf of borrowers. To be smart shoppers, students and parents should find out what fees each lender charges. The lower the fees, the more money the student gets to pay for school. Students and parents should also see what benefits lenders offer when they’re paying back Stafford or PLUS Loans. Many FFELP lenders offer interest rate deductions for automatic withdrawals and reductions to the principal for a history of on-time payments. The new Alabama College Loan Program offers on up-front fees and excellent repayment benefits for Alabama students and parents. In addition to federal student loans, many lenders offer private student loans. These are called “alternative loans.” As with any private loan, students owe it to themselves to do some comparison shopping before borrowing.
For more information about financial aid and college planning, visit www.AlabamaMentor.org; write the Alabama Student Loan Program, 100 North Union Street, Suite 308, Montgomery, AL 36104-3762, or call 334- 265-9720, toll free (800)-721- 9720.
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