Basic Information about Student Loans
Loans are just one of the many options which students have available to help pay for college. Scholarships and grants should be pursued first, however; because these do not have to be paid back. If you do find that a loan is the only way you can fund your education, you should be aware of the many different loans available to you, and the many different aspects of those loans that must be considered before applying.
Your first step is filling out the Free Application for Federal Student Aid. It is important to get the form, found at fafsa.gov, filled out as soon as possible. State governments use the information on a first come first served basis when determining your eligibility for their grants. This form is also required when requesting federal loans.
If your scholarship and grant awards are not enough, begin applying for loans. One type of loan to consider is the PLUS (Parent Loan for Undergraduate Students). It is a loan that parents are responsible for repaying 60 days after disbursement at a current rate of 8.5 percent. While there is no limit on funds, a credit check is required. If your parents do not qualify, the limit on a Stafford loan may be increased.
Stafford loans are paid directly to the school by the government or are provided by lenders. Subsidized loans are need based and the interest is paid by the government while you are in school. Unsubsidized loans can be acquired by anyone, regardless of need. You are responsible for the interest while in school but can elect to defer it until after graduation. Repayment of these loans, at a current fixed rate of 6.8 percent, is not expected until six months after you graduate. You can, however; get a rate reduction through your lender or a forgiveness of some or all of your loan depending upon your profession. You can borrow different amounts based upon your year in school. Freshmen can borrow up to $3,000. Sophomores can receive $4,500. Juniors and seniors can get $5,500. If you are an independent student or if your parents were turned down for a PLUS loan, the limits on a Stafford loan are increased.
Another type of loan is a Perkins Loan. This is also need based, and eligibility is determined by your school’s financial aid office. The loan is funded by the school from money received by the government. It is subsidized and has an interest rate of 5 percent. Undergraduates and graduates can receive $4,000 and $5,000 per year respectively.
Those who have received loan funds before can expect their money about a month before that of a first time borrower. This means you should apply as soon as possible, especially if you’ve never received a loan before. An entrance interview is required before a loan can be disbursed. Your school’s financial aid office will assist you in completing the interview, which can probably be done online.
One thing to keep in mind when applying for loans is some schools will not accept Stafford Loans. Check with your school’s financial aid office. If this is the case, you will either have to find a school that does or acquire a private loan. Most private loans will have to be immediately repaid, and are most likely based upon credit checks which makes them unattainable for some students. Some loans, such as one through U-promise, can defer payment until after graduation.
Do not procrastinate. Get your forms in early. Explore every avenue for aid that you can. This will ensure that any setbacks that come along can be handled quickly, and you will get your money on time. You have enough stresses to worry about in college. Don’t make money one of them.
