Today, federal college student loans are one of the largest forms of college student aid. Making up 41 percent of the total financial college student aid awarded to undergraduate college students each year. Most college students can expect to receive a student loan as part of a financial aid award package. There are typically two kinds of categories for a college student loan; loans based on financial aid need and loans not based on financial aid need.

College Student Loans Based on Financial Aid Need

The federal government is the main provider of need based college student loan funds. Your award letter will always list the kind and the amount of need based loans.

Features of Need Based College Student Loans

Need based college student loans usually share three distinct features?

1. A Low Interest Rates – Stafford College Student Loans offer a fixed interest rate of 6 percent and PLUS College Student Loans are fixed at 8.5 percent. The Perkins College Student Loan interest rate is currently at 5 percent. No credit check will be required for a federal college student loan.
2. Delayed Repayment – With a need based federal college student loan, no payments on principal will be due until after you graduate or leave school.
3. In School Interest Subsidy – This simply means the government pays the interest that accrues on the student loan while you are in school and during the six-month grace period after graduating, resulting in some substantial savings. If you did not have this subsidy, you would either need to make interest payments while in school, or the interest would be added to the principal of the student loan, making it a much more expensive college student loan.

The Three Need Based College Student Loans

Typical need based college student loans are Perkins College Student Loans, subsidized Stafford College Student Loans, and Direct Student Loans. For loans based on financial aid need, the financial aid office at you school of choice will help guide you through the process.

• Perkins College Student Loans – If you have been awarded a Perkins College Student Loan, the Financial Aid Office will send a promissory note that must be signed and returned. Since the college has already been given its Perkins loan funds, it simply transfers the funds to your student account as a credit against charges.
• Subsidized Stafford College Student Loans – For a Subsidized Stafford College Student Loans, the financial aid office will generally ask you to choose a lender. Many lenders will offer online loan applications. Remember you do not have to use there preferred list. Once you have completed the student loan application and the loan is approved, the money will be sent directly to your school for disbursement. Usually, the loan amount will appear as a credit on your account.
• Subsidized Direct Student Loans – Direct Student Loans work the same way as a Stafford College Student Loan except that the federal government is the lender.

Non-Need Based College Student Loans

These are outside of normal need college student loans, often times used to help families that cannot afford to pay their expected contribution from savings and current income.

Some colleges will include one or more of these college student loans in your award letter. When reviewing your financial aid, you should removed these loans and put them to the side. When you have calculated your family’s share of cost, you may find that it is more than you can afford. If so, it is time to consider these types of loans.

Federal College Student Subsidized Loans and Unsubsidized Stafford College Student Loans

To Be Eligible Students:

• You must have a financial aid need
• You must make satisfactory academic progress towards your educational goal
• You must be enrolled in at least half time.
• You must not have prior college student loan defaults or any Federal overpayment blocks
• You must have declared a degree plan on file in the admissions office of your college or university

Freshman subsidized maximum college student loan limits per year are $3,500 and sophomore college student loan limits are $4,500 per academic year. As an example, you are usually considered a freshman if you have 0-29 credit hours and 30 or more, you are would be considered a sophomore. In most cases, developmental course work does not count towards degree or academic levels.

Unlike grants and scholarships, college student loans must be repaid. The maximum life time amount of a college student loans a college student can borrow at all schools with the subsidized program is $31,000 and the maximum lifetime amount a college student can borrow is the combined subsidized and unsubsidized programs of $57,500. If you plan to attend any other college after completion of your program of study at your current college, then please keep in mind when deciding how much you will need to borrow. It is important you borrow conservatively and only borrow what you will need. Once a college student has borrowed the aggregate limits, there will be no additional eligibility for any federal college student loans.

The actual student loan may be limited to less than this, depending on your cost of attendance, other financial aid assistance, and the family financial aid conditions. The U.S. Department of Education will pay the interest during the time the college student is enrolled and during the grace period of six months following enrollment. The interest rate will be variable and can not exceed 8.25%.

For subsidized college student loans, borrowers will not begin there repayment of the loan until six months after the college student completes or drops enrollment to less than half time. The college student loan must be repaid within 10 years.

For unsubsidized college student loans, this program is available to college students, regardless of there income. The interest payments begin the day the student loan is disbursed and the college student is responsible for interest accrued during the school year and deferment periods. Interest rates and loan limits are the same as the Federal Stafford College Student Loan Program. Repayment of the principle begins six months after the college student ceases to be enrolled in at least half time. Generally, dependent college students will not be certified for unsubsidized college student loans unless the parent or guardian has been denied a Federal PLUS Loan.

The options are there for you to choose from. Do your homework and research and chose the best option that suits your financial situation. It is important to apply for all Financial Aid, even if you do not think you qualify. You can never know until you do apply.

While there are many different college student loan options available, there are really only two different kinds of college student loans:

1. Federally guaranteed college student loans. These student loans offer some of the lowest rates, and some of the most flexible repayment options. They will not require a co-signer, and you will get one or a few of them (in most cases) regardless of your financial aid need. In some cases, you might have to borrow directly from the federal government.
2. Non-governmental or private college student loans. Many lenders offer alternative (private) college student loans, but in many cases, the rates will be higher than federally backed college student loans, and the terms will not be quite so flexible. In addition, many private college student loans will require a co-signer.

If you have been awarded a college student loan, the schools will ask you to select a lender from there preferred list of lenders. Remember, it is your right to choose you are a lender you are comfortable with even if it is not on the list. The only exception to this is with schools, in which they participate in the Federal Direct College Student Loan Program (Direct Student Loan). At these schools, you do have to borrow directly from the Federal government.

You need to apply early every year, to ensure you will receive funds in time for the start of the semester. Not all schools will process college student loan applications the same way. Some will want you to use a paper application, while others will have you fill out an online application for electronic processing.

College student loan funds will go directly to the school via check or electronic fund transfer.

If you are an independent college student, your Expected Family Contribution will not include any expected or unexpected help from your parents or guardian. You will be considered an independent college student if:

• you are 24 years of age or older;
• you are married;
• you are enrolled in a graduate or professional educational program (beyond a bachelor’s degree);
• you have legal dependents other than a spouse;
• you are an orphan or ward of the court (or you were a ward of the court until age 18); or
• you are a veteran of the U.S. Armed Services.

You can always check with your college financial aid office if you have questions regarding your dependency status. They are trained professionals and are there to serve and help you through this difficult financial time in your life.

Some special aid programs can make the college experience just a little easier for the non-traditional college student. For example, there are many special graduate scholarships. In addition, there are assistantships that will offer an on-campus employment to non-traditional college students.
To find out about these special opportunities, check with your school’s financial aid office. However, here are a few points you should remember as you pursue these options:

• Make sure you are aware of all deadlines, paperwork requirements, application fees and deposits for these programs.
• Be prepared to have your high school and previous college transcripts sent to the school you are interested in.
• Some of these awards are based on financial aid need, so be prepared to complete financial aid paperwork.

Depending on your financial aid need circumstances, the Federal Methodology will use one of three models to decide your EFC: the regular, the simplified, and the automatically assessed formulas. Which one is applied depends on your financial aid and need situation.

The Regular Formula – Assets and Income
For the majority of us, this is the formula that will be applied. It calculates your assets and income and then determines how much your family will be able to contribute. (Note that graduate college students are automatically considered an independent, so parent information will not be taken into account.) Your assets have monetary value (checking accounts, savings accounts, etc) is calculated with what you earn. I have outlined how it works:
• Asset Assessment – The assets you report on your FAFSA application are added up to determine your family’s financial stability. If it becomes less than zero, then it is calculated as zero. If you own property such as a home or business, your net worth will be adjusted to help protect these assets. The Federal Methodology will then waive a portion of your net assets for educational savings and asset protection and becomes left over is your discretionary net worth. Basically, cash and what can be turned into cash (sold). It is a possibility that your discretionary net worth would be less than zero. This amount would then be multiplied by an asset conversion rate, or the portion of your assets the Federal Government thinks you will be able to contribute to the cost of college. However, if the amount comes out as zero or less, then your asset contribution is zero.
• Income assessment -Your asset contribution will be added to your available income to determine your adjusted available income. If you have ever files a tax return, this may sound a little familiar. This total is then multiplied by a rate that will vary depending on your adjusted available income, the more you have, the higher the percentage. Finally, the Federal Methodology arrives at your EFC for that year. If you have more than one child in a family attending college at least half time, the EFC will be divided equally among them. Therefore, if you have two kids in college and the EFC is $5,000, and then $2,500 is allowed to the EFC for each child.

Simplified Formula or Simplified Needs Test – Income Based Only
Sometimes, the Federal Methodology will ignore your assets altogether and uses your income only to calculate your EFC. You could qualify for this simple formula if you meet these criteria:
• You or your parents have or can file a 1040A or 1040EZ, or do not have to file any tax returns at all.
• Your parent’s (if you are a dependent) adjusted gross income on their return (or on their W-2s if they are not required to file) is $49,999 or below.

What matters the most is whether or not you (or your parents) are eligible to file a 1040A or 1040EZ, not if you actually filed them. A family could have filed a 1040, but if their combined income was less than $50,000 and they were eligible to file a 1040A or 1040EZ, the qualifications for the simplified formula has simply been met.

Automatic-Zero EFC – Straight Forward Numbers
For the last Federal Methodology model, there is not much to evaluate. If you or your family qualifies, the EFC assessed is automatically at $0! If you are an undergraduate, this makes you eligible for the maximum Federal Pell Grant.
The criterion is simple:
• You or your parents filed or can file a 1040A or 1040 EZ, or you and your parents are not required to file any tax returns at all; and
• You or your parent’s adjusted gross income on their return (or on their W-2s if they are not required to file) is $20,000 or less.

The process of determining federal college student aid eligibility is different from the process of applying for admission to a college or university. The Free Application for Federal College Student Aid Assistance (FAFSA) is the basic application that will be used to apply for federal college student aid.

1. You should know that applying for federal college financial aid assistance is free at www.fafsa.ed.gov. Anytime you need more information you can visit Federal College Student Aid at www.FederalStudentAid.ed.gov or call them at 1-800-4-FED-AID (1-800-433-3243). You may also talk with your high school counselor or the financial aid assistance office at the college or university you plan to attend. Just remember that federal financial aid assistance is provided to help college students pay for college, so you will not need to pay to apply. Do not every pay for help in applying for Federal College Student Aid.
2. Get your Federal College Student Aid PIN. This PIN will let you electronically sign your free online Application for Federal College Student Aid (FAFSA), and make corrections to your application information, and much more all online. You can go to www.pin.ed.gov and apply for a PIN.
3. You will need to gather your documents. You will need income tax information like tax returns and W-2 forms. Having these documents ready will make applying much simpler. For a full list of what you will need you can go to www.fafsa.ed.gov. If you have not filed your income tax return as of yet when you are ready to complete the FAFSA, you can estimate your tax information and make the corrections later.
4. Check all the deadlines. Although you may complete the FAFSA between January 1 and June 30 of the following year to get federal college financial aid, deadlines for college or state loan aid are typically much earlier. Applying online at www.fafsa.ed.gov as soon as possible on or after January 1 will help you meet the college and state loan aid deadlines.
5. After you have submitted your FAFSA, Federal College Student Aid will send you a Student Aid Report or SAR. The SAR will be a summary of your information and provides information on the status of your FAFSA application, so it is important that you review your SAR, and, submit any changes if necessary as soon as possible.
6. The colleges you list on your FAFSA will receive your information once the application has been processed. Sometimes these colleges and universities need to verify the information that you have provided on your FAFSA, so they might ask you to submit tax returns or other documentation. This process is called the verification. Make sure you submit the documentation to your college by the deadlines or your federal college fincial aid could be delayed.
7. Always follow up with your college’s financial aid office. Make sure the financial aid office at your college does have all the information needed to determine your eligibility.
8. Once you have received your award information that shows the financial aid you are being offered, contact your college’s financial aid office if you have any questions about the financial aid being offered.

The federal government does require college students to complete the U.S. Department of Education’s Free Application for Federal College Student Aid (FAFSA) as a basic application for its federal student financial aid assistance programs. You can get one from your high school or your college for the appropriate year (usually available in November), or you can also visit studentaid.ed.gov for general federal student financial aid information and the online FAFSA. The processing of this application is free to all.

Your current high school counselor can help you determine the programs you may be eligible for and how best to apply.

Federal Student Financial Aid Programs
Federal Supplemental Educational Opportunity Grant (FSEOG)

This grant is provided to a limited number of undergraduate college students with financial aid need. Preference is given to college students with exceptional financial aid need. FSEOGs are awarded by the colleges.

Federal Pell Grants

This is federal student financial aid assistance awarded by the federal government based on financial aid need. The Student Aid Report (SAR) informs college students of their Pell Grant eligibility. The grant may be used toward tuition, room and board, books, or other educational costs and does not require repayment. FREE Money!

Federal Perkins College Student Loan

This is a College Student Loan funded by the federal government and awarded by the college or university. The college student loan will feature low interest rates and are repayable over an extended period of time, usually 10 years. However, there are not payments required as long as you are enrolled and attending school.

William D. Ford Federal Direct Student Loan (Direct Student Loan) Program

This loan will provides both Stafford College Student Loans for Students and PLUS Student Loans for there parents. Eligible college students and parents borrow directly from the federal government at participating colleges and universities. Direct Student Loans will also include Direct Consolidation Student Loans. Repayment of these student loans are made to the U.S. Department of Education.

Federal Family Education College Student Loan (FFEL) Program

With this college student loan, you will be provided both Stafford College Student Loans for college students and PLUS Student Loans for parents through many participating private student loan lenders. FFEL also provides for Federal Consolidation Loans. Repayment of these student loans is made to the bank or other private lender that have made the student loan.

Subsidized FFEL or Direct Stafford College Student Loans are awarded based on financial aid need. Recipients will not be charged interest until they start repayment.

Unsubsidized FFEL or Direct Stafford College Student Loans are not awarded based on financial aid need. Interest accrues from the time the student loan is disbursed until it has been paid in full.

PLUS Loans (parents) will provide low interest student loans to credit approved parents of eligible undergraduate college students. Repayment will generally begin 60 days after the student loan has been fully disbursed.

Consolidation College Student Loans will allow college students or parents the opportunity to combine several kinds of federal student financial aid loans into a single loan with one monthly payment.

While everybody would like to go to college debt-free, college student loans are unfortunately unavoidable in today’s educational world. While college student loan debt is a common occurrence of attending college, it does not have to be overwhelming. You can make the process of taking out a college student loan to pay for school less painful by educating yourself about the different types of college student loans available.

College student loans can be generally broken into the categories of federal and private college student loans. Private student loans are loans college students borrow from lending agencies, with credit requirements, interest rates and repayment schedules set by the financial institution, rather than by the Department of Education. Federal college student loans, on the other hand, are available for both college students and there parents, and have uniform interest rates and requirements. The most common federal student loans are Stafford Loans, Perkins Loans, and PLUS Loans.

Federal loans for college student borrowers are the most widely available form of federal student financial aid assistance, and are what many people first think of when they hear the term student loans. This financial aid is available in two varieties: subsidized and unsubsidized federal college student loans.

Perkins College Student Loans are a type of subsidized college student loan, with a fixed interest rate of 5% that will not start accruing until repayment starts, generally 9 months after graduation. Similarly, subsidized Stafford College Student Loans, often referred to as the good kind of Stafford Student Loan, do not accrue interest while borrowers are enrolled in school. Students begin paying interest on subsidized Stafford College Student Loans (currently fixed at 6.0%) 6 months after graduation, when they begin repaying the student loans.

Federal unsubsidized Stafford Student Loans, on the other hand, will charge borrowers interest while they are in school, with the rate currently fixed at 6.8%. While college students must have unmet financial aid need in order to be awarded a subsidized Stafford Student Loan or a Perkins Student Loan, unsubsidized Stafford Loans can be awarded as long as the student’s total financial aid award does not exceed their total cost of attendance.

There are limits on how much a college student can borrow each year in federal financial aid loans, however there is no cap on Federal PLUS Loans. PLUS Loans are generally taken out by parents and typically come with much stricter borrowing requirements than Stafford College Student Loans and Perkins College Student Loans, which cannot be denied to a college student based on credit or employment status. A PLUS Loan application does require a credit check, but being approved has become easier, and additional unsubsidized Stafford College Student Loans are available to a college student borrower if their parents’ PLUS Loan application has been denied.

You apply for federal college student loan by completing the FAFSA on the Web (the Free Application for Federal College Student Aid); an application also required for Federal Pell Grants and any other state and federal grant programs. While Stafford College Student Loans can be awarded at any time to any college student who meets basic eligibility requirements, Perkins College Student Loans are awarded by the school based on financial aid need and when the student applied for financial aid assistance.

Federal Stafford College Student loans are a fixed rate college student loan for undergraduate college students attending a college or university at least half time. Stafford college student loans are the most common and one of the lowest cost effective ways to pay for school. There are two different kinds of undergraduate federal college student loans, the subsidized Stafford College Student Loan and the unsubsidized Stafford College Student Loan.

Subsidized Stafford College Student Loans are awarded to undergraduate college students based on financial aid need. When you obtain this type of college student loan you are not charged interest before you begin repayment or during periods of deferment. The federal government will subsidize all the interest during this time.

Unsubsidized Stafford College Student Loans are not awarded based on financial aid needs. Any eligible undergraduate college student can take out an unsubsidized Stafford college student loan. However, unlike the subsidized Stafford loan, you will be charged interest from the time the college student loan is disbursed, to the time the college student loan is repaid in full.

Stafford College Student Loan Interest Rates

Graduate Stafford College Student Loans (both subsidized and unsubsidized) have a fixed interest rate of 6.8% through 2013.

Federal Stafford college student loans are fixed rate college student loans for graduate college students attending a college or university at least half time. Stafford college student loans are the most common and one of the lowest cost effective ways to pay for school. There are two different kinds of graduate federal college student loans, the subsidized Stafford College Student Loan and the unsubsidized Stafford College Student Loan.

Subsidized Stafford College Student Loans are awarded to graduate college students based on financial aid need. You will not be charged interest before you begin repayment or during any periods of deferment. The federal government will subsidize the interest during these times.

Unsubsidized Stafford College Student Loans are not awarded based on financial aid needs. Any eligible graduate college student can take out unsubsidized Stafford college loans. You will be charged interest from the time the college student loan is disbursed, to the time the college student loan is repaid in full.

Putting it in very simple terms a Federal Stafford College Student Loan is a government secured college student loan available to undergraduate and graduate students at a rock bottom rate. There will be no collateral or credit check required, and payments will be deferred until you graduate.

• Low 6.8% fixed interest rate
• No application fees
• No collateral or credit checks
• No payments while you are in school
• Eligible for federal college student loan consolidation
• Tax deductions and flexible repayment options available
• No prepayment penalties

How can you go wrong? The first thing you need to do is fill out the free online FASFA online application. This will qualify you for the Stafford College Student Loan. Even if you do not think you will qualify, I encourage you to file the FASFA any way. You will probably be surprised at what you will qualify for.

Avoiding Student Loan Debt and Choosing the Right College

Today there seems to be more financial aid assistance available than ever before: more federal aid, institutional incentives, as well as more scholarships. Even by taking advantage of all of the above options, many college students still come up short. Unfortunately, college students often find themselves strapped with a huge financial burden that can weigh up to $100,000 before they even reach their twenty-first birthday. That is a lot to look forward to upon graduating. You ask, what is the solution? Educating yourself about the many alternatives and options that can help you save money and lower that debt.

Being informed about the many options available should be your first step in saving on the cost of tuition. For many students, college is just about obtaining a diploma. For others, it is simply about campus life, parties, and opportunities to get involved in sports. If you want to minimize the amount of college student loans that you take out to fund your education, you need to determine what sacrifices you are going to be willing to make that will help you achieve this. This will not be optional; to save money in college you will most likely need to give up some college luxuries in order to lighten your financial burdens.

You should consider the below questions:

Why is college so important to me? As stated above, college does mean different things to different students. Is college important because it will help you obtain your dream job or is it important because you will be the first in your family to go to college? The answer to questions like these can help you determine what purpose college will serve in your life. Simply put, the less attached you are to a particular college or university the better because there are many options available for college students who are willing to look outside the box.

Where do you see yourself in ten years? If you see your future as a construction worker or you want to be an aesthetician, then maybe there is no need to fork over $50,000 dollars in tuition. Unless you are completely in it for the academic benefit, college for you may not be the right chose. However, if you do plan to become a teacher, doctor or engineer, you probably realize that obtaining a diploma is a crucial and important step in the direction of your goal. Another important consideration is that for more general degrees such as English, education, and communications, the prestige of the college is not nearly as important as it is for those pursuing specialized degrees in chemistry or medicine. Meaning you may be able to save yourself from footing the bill for an unnecessarily name brand tuition.

What do you want your college experience to look like? Some college students are seeking an independent college career; one that provides flexible scheduling options and a workload that will be balanced with a part-time job. Other college students, like fraternity boys, sorority girls, and football players want to be totally submerged in the college atmosphere. These college students intend to eat, sleep, and play on the college campus. For the college student looking for this experience it may be harder to minimize a college student loan as not every college will cater to such a lifestyle, and typically those that do will cushion their tuition to compensate. If you are of the independent college student breed, you will likely find that there are hundreds of options that help to make college more affordable.

Most universities and colleges will offer a Federal Direct Stafford Student Loan (Federal Direct Subsidized and Unsubsidized Student Loans) as a participant in the William D. Ford Federal Direct Student Loan Program. When you borrow a Federal Direct Student Loan, you are borrowing from the federal government by receiving funds directly through your college or university. There are colleges and universities that will not participate in the Federal Family Education Student Loan program (FFEL).

Under the Federal Direct Student Loan Program, you will have many different options for repayment; therefore, you can select the repayment plan that is best for your particular financial circumstances. For more information regarding repayment options, you can talk to the financial aid office at your school.

Federal Direct Subsidized Student Loan

The Federal Direct Subsidized Student Loan is a need based federal student loan awarded only to college students who demonstrate a financial aid need. Undergraduate, graduate, and professional college students who have unmet financial need will be considered for this student loan up to the amount of the college students’ borrowing limit. All borrowers must be U.S. citizens or eligible non-citizens enrolled at least half time and maintaining a Satisfactory Academic Progress for Financial Aid Assistance Eligibility. In addition, borrowers must meet all other requirements listed on the Student Rights and Responsibilities pamphlet your school will provide to you.

Federal Direct Unsubsidized Student Loan

The Federal Direct Unsubsidized Student Loan is a non-need based federal student loan that cannot exceed the educational cost of attendance minus other financial aid assistance. Undergraduate, graduate, and professional students who are not eligible for any Subsidized Student Loan or are eligible for only a portion of the annual student loan limit for the Subsidized Loan may apply for the unsubsidized student loan as well. Undergraduate annual Unsubsidized Stafford student loan limits are increased for student loans initially disbursed on or after July 1, 2008. Borrowers must be U.S. citizens or eligible non-citizens enrolled at least half time and maintaining Satisfactory Academic Progress for Financial Aid Assistance Eligibility. In addition, borrowers must meet all other requirements listed in the Student Rights and Responsibilities pamphlet your financial aid assistant will give you.

Additional Unsubsidized Student Loan for Health Profession Students

Additional unsubsidized amounts are available for college students enrolled in the health professions colleges. This would include the Colleges of Medicine, Dentistry, Optometry, Pharmacy and Veterinary Medicine. College students in these professional programs may receive up to a maximum of $20,000, as long as it does not exceed the cost of attendance.

The aggregate subsidized and unsubsidized student loan amount is $224,000.

The Application Process

File the FAFSA or Renewal FAFSA to be considered for a Federal Subsidized Direct Student Loan or Unsubsidized Direct Student Loan.

Basic Borrowing Limits

Borrowing limits will depend on class rank and academic level, and vary for undergraduates and graduate as well as professional college students. Special rules will apply to college students taking coursework through the Office of Continuing Education (CEd) and graduate nondegree coursework.

The Office of Student Financial Aid Assistance uses the National College Student Loan Database Service (NSLDS). Consequently, your student loan award will reflect any loans borrowed at any college or university previously attended. Refer to your Student Aid Report (SAR) for your student loan aggregates.