6:33 PM
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by scorvgirl
Federal and Private Applications
The
student loan application process can be confusing, but it’s almost a requirement for most students. Very few can afford college without federal student loans and private loans, as well.
Federal Loan Application: The FAFSA
The Free Application for
Federal Student Aid (FAFSA) is
THE federal loan application. Here’s the deal: the FAFSA is long and confusing. There is no short form or alternative application you can fill out and still get federal funds. However, there is assistance for students and parents that need help filling out the FAFSA.
The FAFSA may help you qualify for federal grants and work-study programs as well as federal loans. Unfortunately millions of students fail to complete the FAFSA for a variety of reasons: they miss the deadline, they are lazy or they think they just won’t qualify for money. If you fail to complete the FAFSA, truth is you are missing out on some of the easiest college money to come by.
How to Complete the FAFSA
The FAFSA is available in an online version (also in a Spanish version), a version you can download and print off, or you can send for a hard-copy of the application. The majority of students opt to file with the online version. Before you can complete an online FAFSA you are required to apply for a Personal Identification Number (PIN), which allows you to create a virtual account.
FAFSA deadlines are hard and fast. There is a federal deadline, but each state has a FAFSA deadline as well. Best bet: go by the earliest of the two deadlines.
Tip: The FAFSA is often a requirement for all types of scholarships, grants and loan programs outside the federal realm, another killer reason to make sure you get it done.
**For FAFSA assistance contact your high school guidance counselor or college admissions advisor.
Once You’ve Submitted the FAFSA
Based on the household income information on your FAFSA the federal government determines how much and what types of programs you qualify for. This information is reported to you in a follow-up document, the Student Aid Report (SAR).
The SAR includes details regarding:
* how much money you and your family are expected to contribute to your education also officially known as the Expected Family Contribution, or EFC.
* exactly what forms of federal financial aid you have qualified for—subsidized or unsubsidized Stafford Loan, Perkins Loan, Pell Grant.
The schools you indicated on your FAFSA also receive copies of your SAR. With this they create a financial aid package to offer you if they agree to accept you as a student. They send this to you in an award letter. Once you decide which school to attend, then you choose lenders for your federal student loans and if necessary lenders for any private loans you many deem necessary.
**You can choose any lender you want; the decision is not up to your school.
Applying for Private Student Loans
Private student loans are very different than the federal student loans and more like regular bank loans. They are credit-based as opposed to need-based. The FAFSA has nothing to do with private loans. For instance, you’re going to have to go to your bank, a student loan lender or credit union directly in order to borrow money. You will be required to fill out a loan application form and a credit check will be run.
What if you don’t have good credit or any credit?
Bad credit or no credit should not be the obstacle that keeps you from a college education. Here’s how you can be prepared for the credit check.
Get a Student Loan Cosigner
A cosigner, if they have better credit than you, can help you secure a private student loan at a much lower interest rate. What’s a co-signor? A person who knows and trusts you and vice versa who has really good credit and is willing to sign the loan promissory note along with you. A co-signor can be a parent, a relative or good friend. Essentially should you become delinquent on loan payments or worse yet default, the co-signor is responsible for any payments.
Tip: You can work on rebuilding bad credit or establishing credit as soon as you begin repaying your private student loan. Make sure your lender offers a co-signor release after so many consecutive, on-time payments. With every on-time payment you make you build a credit history.
Repaying Student Loans
Federal loans come with excellent repayment terms: subsidized Stafford Loans require you pay nothing until you graduate or leave school. Other federal loans that require interest-only payments may be deferred in some cases, until you graduate.
Most federal loans are packaged with 6-month grace periods; 9-month for Perkins Loans. Use this time to ideally get a job, create a budget and get settled.
Student loans are a must for most students. Best advice: do not overlook the FAFSA. It is a critical component in the college financial aid process.
5:58 PM
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by scorvgirl
While it is sometimes possible to get a
private loan with a very low interest rate, your best bet is with
federal student loans. The benefits of a
low interest student loan are obvious. A lower interest rate means lower payments, a shortened repayment period and more money in your pocket.
Another added benefit of
low interest student loans is the subsidized aspect of many federal student loans. If you get a
Stafford Loan or Perkins Loan, you may very well have your interest paid by the government while you are in school and even up to nine months after you graduate.
The Two Major Types of Low Interest Loans
We’ve already established that the major type of low interest student loan is a federal loan. Because of this, we will concentrate on the types of federal loans that offer extremely low interest rates and other benefits to students struggling to finance their education.
Stafford Student Loan
A Stafford student loan is a form of low interest loan that allows students with little to no credit to afford college. This is so because, as a federal student loan, the Stafford loan has different requirements than a standard lender like a bank. Rather than basing your worthiness on a credit score, it is based on whether or not you fall within the eligible income bracket, if you are attending school at least half-time and if you have never defaulted on a loan before.
There is also a limit as to how high the interest rate on a Stafford loan can be. It is currently 8.2%, though most people get a rate that is lower than this. Another added benefit is that you can get a Stafford loan subsidized, meaning that the government will foot the bill for the interest that accrues while you are in school. Stafford loans are also available unsubsidized, though the low interest rate still applies.
Perkins Student Loan
A Federal Perkins Loan is another form of federal loan that provides many options for borrowers. However, in order to qualify for this loan you need to show exceptional need. In fact, most that qualify also qualify for the Federal Pell Grant—another form of financial aid that requires exceptional need to be eligible. If you do qualify for this type of low interest loan, you will be pleased to know that it is subsidized as well. The Perkins Loan also has the largest grace period of all the loans, meaning you don’t have to pay a dime back on your loan until nine months following graduation.
The interest rate is also the lowest you will find anywhere—a low 5%! You will never get a rate like that at a bank or credit union. This is why federal loans are the true low interest loans. Nothing else can come close to their outstanding rates.
How to Take Advantage of These Low Rates
The path to financial aid success starts with the FAFSA. If you want to secure a federal loan of some sort—or even more preferably, a grant—then you need to have your FAFSA submitted by March 2 of the year you plan to begin attending school in the fall. Once your FAFSA is processed, you will receive a Student Aid Report or SAR, outlining how much money you are expected to contribute to your education financially. A few weeks after that, an award letter should arrive in the mail detailing what types of financial aid you have qualified for and how much money you can or will receive. You will need to return this award letter indicating what financial aid you are accepting.
From then, you will need to follow the specific instructions for securing the type of low interest loan you’ve been awarded. A Stafford loan requires you submit a promissory note, while a Perkins loan requires you to fill out paperwork and submit it directly to your school, as your college of choice will be the lender.
Regardless of the type of loan you end up getting, just always note the interest rate. Even though you may be new to the world of finances and credit, lenders expect you to make responsible and informed decisions. Always educate yourself about a potential loan, even if it does have an enticing low interest rate, before you sign on the dotted line.