Bank Student Loans - Federal versus private student loan

Bank student loans are a very common type of loans used for college financing. There are two differentiated types of  bank student loans: federal loans and private loans, both of them designed to help students pay for college programs and campus expenses. The amount which can be borrowed varies according to the educational institution’s policies, based on several aspects, such as students’ income level, parents’ income level and other factors which are calculated in a formula specially created for students.

Federal loans and private loans are both bank student loans designed for the same purpose - provide students with the financial means for their studies, both undergraduate and graduate. Bank student loans have two great benefits over common loans, the interest rates are lower and the repayment is far easier. The interest rate is usually around two percent lower than the one for conventional loans, this varying according to the bank student loans you opt for. 

There are, of course, many differences between federal and private loans. The main difference is represented by the time status in which payments are enrolled, which is an extremely important factor that help students and their parents configure a financial plan during the years of study, which prove to be very costly. In the case of bank students loans obtained through federal aid, payments start with at least half time status. These types of bank student loans are guaranteed by the U.S. Department of Education directly or through diverse guaranty agencies, both offering a six months grace period.

Private student loans are bank student loans that are not guaranteed by federal agencies and imply banks or other finance companies. These types of loans are a combination of the best characteristics of the federal loans. A great benefit is that private student loans provide higher amount limits than federal student loans, offering financial safety to students throughout all years of study. You can also apply for a private student loan if the federal loan already used would not suffice. Another aspect is that private category of the bank student loans require no payments made until graduation, but interest is applied as soon as financing starts and usually, the interest rate is higher than the one applied to federal student loans. The grace period, on this case, raises to 12 months.

The main disadvantages of private bank student loans over federal student loans are configured by the larger number of fees applied, higher interest rates, and the protection that private bank loaners do not ensure, in comparison to federal loaners. Anyway, what you should do after you have decided on which college institution you’d like to attend, is to analyze with a close attention all aspects of bank student loans providers, either private or federal, according to your necessities and financial planning and decide which one best suits your requirements. Check http://www.student-bankaccounts.com/ and find out more.