How to Qualify for a Student Loan
With the rising cost of college, more students and parents are relying on financial aid to pay for college related expenses, such as tuition, books, housing or a computer. There are several ways to find money for college.
Federal Student Loans
The federal government provides grants and loans to alleviate the rising cost of college. If a student plans to apply for financial aid, they should fill out and submit the Free Application for Federal Student Aid (FAFSA). Colleges and universities require one or more supplemental forms to obtain information not included on the FAFSA. Students will receive an award letter from the colleges, listing the amount and types of financial aid. In order to receive government aid, a student must complete high school or obtain a GED, be enrolled or accepted for enrollment as at half-time student and be a United States citizen.
If a student or parent is unsure if they are eligible for federal student loans, the student should apply for financial aid. There are many factors affecting eligibility for financial aid, such as income, savings, or other students enrolled in college. The amount of student aid can change if the family's economic condition fluctuates.
When submitting the FAFSA, the federal government determines whether students are eligible for grants. A grant is money that does not require repayment. The government awards grants to students it deems most in need of financial assistance. The two main types of grants include Pell Grants and Supplemental Education Opportunity Grants. In addition, students can apply for grants and scholarships through their college or private organizations.
The federal government determines certain students eligible for low interest loan programs. Federal student loans usually have more favorable terms than private loans so many exhaust these loans first before moving to the private loans. Interest rates for these Federal student loans are significantly lower than those of personal loans or credit cards. Federal college loans also provide a variety of deferment options and extended repayment terms. The federal government offers Stafford, Perkins and PLUS loans for students and parents.
The Stafford loans can either be subsidized (the government pays the interest while the student is in school) or unsubsidized (the student pays the interest, although most students can deferred payments until after graduation). Perkins loans, given to those with the most need, are subsidized loans with a fixed five percent interest rate after graduation. Parent Loans for Undergraduate Students PLUS loans, allow parents to borrow funds to help their college-bound children. With PLUS Loans, students and parents begin paying these loans sixty days after disbursement.
Private Student Loans
If scholarships, grants, work-study or federal student loans programs still do not cover the entire amount of college-related expenses, many students apply for private student loans administered by banks or financial institutions such as Sallie Mae. Most private loans are credit based, meaning a student may have to use a cosigner in order to qualify. Many times, the terms and conditions are not as favorable as those offered by the federal government. Private loans can be used for education related expenses, including books, room and board, computers, fees, plane tickets and housing.