Why Should You Abtain A Federal Student Loan?
A federal college student loan will allow a student and their parents to borrow money to help pay for college through student loan programs that are supported by the federal government. They will usually have lower interest rates and offer very attractive repayment terms, benefits and many different options. Generally, repayment of a federal college student loan does not begin until after the student has left or graduated from school. Federal college student loans can be used to pay many school expenses such as tuition and fees, room and board, books, supplies and transportation.
Federal college student loans are given to students through two kinds of programs: the Direct Student Loan Program and the Federal Family Education Student Loan Program. Both programs will essentially offer the same type of college student loans with similar loan terms and borrower benefits. Your school will choose the college student loan program in which it will participate. In both programs, college student loan funds are provided to you through your school.
A private student loan is a non-federal college student loan issued by a lender or financial institution such as a bank or credit union. Private student loans will often have variable interest rates, will always require a credit check and will not provide the benefits of federal college student loans.
Federal college student loans will offer borrowers multi benefits you will typically not find in a private student loan. These will include a low fixed interest rate, income-based repayment plans, and student loan forgiveness and deferment options, including deferment of college student loan payments when a student returns back to school. These are just some of many different reasons why a student and parents should always exhaust federal college student loan options before considering a private college student loan.
To get a federal college student loan, you will have to complete the Free Application for Federal Student Aid (FAFSA). The best and easiest way to complete the FAFSA is online at www.fafsa.ed.gov. There, you will identify schools that you are interested in attending. When your FAFSA has been processed, the schools you have identified on your application will receive your information. The school will then contact you and let you how much financial aid is available for you, including grants, scholarships, work opportunities and federal college student loans. Should you choose a federal college student loan, your school will provide you with instructions on the next step, including how to select a lender.
Undergraduate college student loan limits range from $3,500 to $10,500 per year depending on particular factors, including the student’s year in college. Some graduate students will be able to borrow up to $20,500 each year. Parents can also get federal college student loans to help pay for the remainder of college costs that would not be covered by their children’s other financial aid assistance. This kind of loan is called a PLUS loan. In addition, graduate students can obtain a PLUS loan to help pay for their own education.
While the application process may be easier in some instances for a private college student loan, federal college student loans usually will have lower interest rates and a better repayment term and options than private college student loans will not have. Additionally, schools will use the information provided on the FAFSA to determine the eligibility for other kinds of financial aid assistance that could be provided by the federal government, from your state, or even from the school itself. This financial aid can include grants, scholarships and work opportunities.
