When Looking For Student Loans, Start With The Federal Government
Most parents facing the high cost of college tuition look to find the best sources of college financial aid
. But where can they start?
First, its important to know that parents and students can find financial aid in two sectors: private and public. The two are very different, have different requirements, and offer different options. In this article, were taking a look at federal student loans, which are often one of the best choices for students who need extra money.
Federal student loans usually offer borrowers a lower rate than is available from private lending sources. Repayment terms can be better, as well, allowing for lower monthly payments and longer-term loans if that is what you need. Another thing to consider is that, in most cases, the student doesnt have to start repaying the loan until after graduation. Payment can sometimes be deferred if a student returns to school and the interest rates are fixed for the term of the loan.
Federal student loans come under two types, which are essentially the same. The college you are attending chooses which loan you need, either Federal Family Education Plan Program or the Direct Loan Program.
In most cases, these federal loans will only cover a portion of tuition costs. The maximum amount allowed is $10,500 per year for undergraduates and $20,500 per year for graduate programs. Keep in mind that the average college cost per year in 2009, including tuition, room, and board, was around $30,000 per year for private colleges, and and $12,000 at four-year public schools. The amount of the loan is determined by the school the student is attending and the year they are entering.
Within the two loan programs are three kinds of loans.
---Stafford loans are for undergraduate and graduate students and are broken up into two programs: one for low income students and one for everyone else. The low income students do not have to provide credit references in order to qualify.
---Plus loans. These are low-interest loans in taken out by parents to help pay the difference between real college costs and the amount of the student loan.
---Consolidation loans. Like the name states, these loans allow parents and students to consolidate multiple loans into a single loan with one monthly payment. Private lenders also offer consolidation loans, and its important to note that if students and parents consolidate with a private lender, they will lose other benefits of their federal student loans.When students apply for a federal student loan, they must fill out a Free Application for Federal Student Aid (FAFSA). This form is far more complex than private loan applications, but there are benefits to this complexity. When a student fills out a FAFSA, the school they are attending can also determine whether or not the student is eligible for other moneys, including scholarships, grants, or work programs provided by the federal government, state or the college.
When filling out a FAFSA, its important to include all the information you need at the time of filing. Pay attention to deadlines, specific requirements, etc., that are required for eligibility. If your college requests addition information, give it to then as soon as possible so that your application isnt delayed.
by: Beth Walker
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