If you are considering getting a student loan, you need to determine which one works best for you. The following guide is meant to help incoming college students like you on how to get student loans, and where to get them.
Federal student loans vs. Private student loans
Student loans can be Federal or Private. Most prefer federal student loans because of its low fixed interest rates and flexible payments based on income. Meanwhile, private student loans usually require a co-signer and have variable interest rates that may increase your financial burden.
Federal student loans do not need co-signers and loan repayment won’t start until you graduate, leave school, or take less than halftime upon enrollment. Private student loans, on the other hand require, that you start paying while still in school.
Types of Federal Student Loans
The William D. Ford Federal Direct Loan Program – a type of loan in which the government is the lender. There are four types of direct loans under this program:
- Direct Subsidized Loans require you to demonstrate financial need. On average, qualified students can get up to $5,500 per year. Furthermore, the government pays all interest on your loan.
- Direct Unsubsidized Loans are available without proof of financial need but you will be paying the loan interest. You can get up to $12,500 per year depending on several factors. The interest rate is at 3.86% following President Barack Obama’s signing of H.R. 1911 into law on August 9, 2013 which reduced federal student loan rates.
- Direct Plus Loans can be used by your parents to cover the remainder of the college costs not covered by other aids you applied for. They will have to undergo credit checks and would have to pay all interest. The interest rate is currently fixed at 6.41%.
- Direct Consolidation Loans combine all of your eligible federal student loans, if you qualify for more than one, into a single loan.
The Federal Perkins Loan Program is another type of loan wherein the school is your lender. For this reason, the amount borrowed may be limited and could vary from one school to another. You can get up to $5,500 every year at a fixed interest rate of 5%.
Suggested reading: Student’s Guide to Saving Money in the Summer
How To Get Federal Student Loans: An Overview
Step 1: Complete the FAFSA form
When you and your parents have determined which loan/loans work best for you, the first step would be to complete the Free Application for Federal Student Aid (FAFSA) online. The application period usually runs between January 1 and June 30 every year. The data you provide will be calculated and transmitted by The U.S. Department of Education to the schools you have listed on your FAFSA form. In turn, the schools determine your eligibility for the federal student loans.
Step 2: Review the Student Aid Report (SAR)
The next step is to review your SAR (Student Aid Report) which you can receive four weeks after submitting your FAFSA. Make all necessary corrections and resend to the indicated address. The schools you have listed will also be receiving a copy of your SAR.
Step 3: Communicate with your target school
Confirm with the school you intend to attend that they have received all the necessary data to determine your eligibility for financial aid. The school will then give you an award letter which outlines the financial aid you will receive.
Step 4: Orientation and legal processes
Finally, depending on the type of loan you’ve been qualified for, you may need to undergo entrance counseling arranged by your school to help you understand the loan process.
The financial aid office at your career school will guide you through this, as well as the signing of the Master Promissory Note (MPN), a legal document which states that you promise to repay your loan plus fees and interests. So read through the entire document and make sure that you understand everything before signing.
Federal student loans offer opportunities for students like you to pay for college without having to work on jobs and worry about funds. Thanks to these financial aids, students can now focus more on earning their respective degrees.
Do you want to get the benefits of federal student loans? Take the first step and complete your FAFSA today.
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