Looking For A Student loan and Dont Know Where To Start
Date Added: June 08, 2008 02:16:17 AM
Federal Government Loans
The U.S. Department of Education administers the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. A school can participate in either the FFEL or Direct Loan program but some participate in both.
To obtain most federal student loans, one needs to file the Free Application for Federal Student Aid (FAFSA). The earlier you file your FAFSA, the more likely you are to obtain the full amount of financial aid for which you are eligible! After filing your FAFSA, you'll receive, in the mail, a copy of your Student Aid Report (SAR). A financial aid award letter will the be sent from your school detailing how much aid you are eligible for and in what form that aid will take. Only then can you apply for a loan, not beforehand.
Federal student loans are by far the most affordable loans available to students, with best interest rates and deferred payments (principal and interest) until after graduation. Loans are disbursed in equal amounts over the course of an academic year. For a school that uses semesters, that would mean one disbursement in the beginning of the Fall and one in the beginning of the Spring.
Basic Requirements For A Federal Student Loan:
· You must have submitted a FAFSA (see above)
· For subsidized Stafford Loans, you must have financial need as determined by your school.
· You must be a U.S. citizen, permanent resident, or eligible non-citizen holding a valid unexpired Alien Registration Receipt Card (INS form I-151 or I-551).
· You must be enrolled at least half-time at an eligible institution.
· You must not be in default on any education loan or owe a refund on an education grant.
There are four main federal loan programs:
Federal Stafford Loan
Such loans are made in the name of the student and do not require a credit check since they are guaranteed by a private guarantor and backed by the government. Repayments commence after the student graduates, leaves school or stops attending on at least a half-time basis. For subsidized Stafford Loans, you must have financial need as determined by your school.
Federal PLUS Loan
A parent may borrow up to the cost of attendance (established by the school) minus other financial aid including other loans on behalf of a dependant student. They can get either the FFEL or Direct Loan, but not both, during the same enrollment period.
To be eligible, parents will be required to pass a credit check. If your parents don't pass the credit check, they might still be able to receive the student loan if someone, such as a relative or friend who is able to pass the credit check, agrees to endorse the loan.
There is no grace period for parent PLUS loans. Payments start immediately after the final disbursement of the funds. It is the parent that is responsible for the payments and not the student. Any suggestion that they will be acting as co-signers or guarantors is certainly a misconception.
Federal Graduate PLUS Loan
New legislation has been put in place allowing graduate students to receive PLUS loans in their own names. The terms and conditions applicable to parent Plus Loans apply to Graduate PLUS loans. In particular, it should be noted that repayments will start immediately after disbursement of the funds. Deferment options are available while you are still attending school at least half-time.
You may borrow up to your cost of attendance (determined by your graduate or professional school) minus other financial aid including other loans.
Federal Student Loan Consolidation
After graduation, you may avail of a consolidation loan which allows you to combine all the federal student loans you received to finance your college education into a single loan with reduced monthly repayments and a much longer term for repayment.
For more on student loan consolidation, please see: Why You Should Consolidate Your Student Loans?
Private Student Loans
Should a federal student loan not cover your educational expenses, there is always an option to take up a private loan (sometimes referred to as an alternative student loan) as well - these loans are available from banks and other such lenders. The same applies if you do not wish to make payments of principal and interest while in school or if you want a loan that is in your own name.
Private student loans offer convenience and flexibility not found in other federal loan programs. However, they must be used solely for education expenses and you will need good credit and sometimes a co-signer in order to qualify for the private loan. Interest rates, fees and other terms tend to vary from lender to lender but are usually competitive.
