Experts advise students to take federal loans

Stafford, Perkins, PLUS loans available to students

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A college education has long been considered the path to a rewarding career.

"The right degree at the right price is still the best investment you can make," said Greg McBride with

But as the cost of a college education has gone up, so has the demand for loans to offset the expense.

"It took us hours to figure out how much money would be the right amount without taking out too much or too little," said Pam Weston, a sophomore at Florida State University.

Weston turned to federally backed student loans, a wise move, says McBride.

"You always want to fully utilize your federal student loan options before you go into the private market and that's because federal student loans have some nice advantages," said McBride.

Federal loans have lower interest rates than private loans and terms not often found in the private market. Federal loans qualify for forbearance, or a break in payments, if the borrower encounters financial difficulty after graduation.

Federal loans can also qualify for forgiveness, which would either be a reduction in payments or an elimination of the remaining balance.

"But, again, these forgiveness programs typically don't kick in for a period of decades so you may be making payments for 20 years before that forgiveness kicks in," said McBride.

There are several types of federal loans available, including:

  • Stafford loan:  No income or credit requirements. Repayment must begin six months after graduation.
  • Perkins loan:  Available to low income students with repayment beginning nine months after graduation.
  • PLUS loan:  Can be taken out by parents of an undergraduate or by a graduate or professional student.

"So, those that are going for their doctorates and have already maximized their Stafford or their Perkins, they would be resorting to plus loans as their federal student loan option," said McBride.

Experts said it's important to keep in mind the cost of the degree versus the salary made out of college.

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