Getting a Handle on Federal Student Loans
Federal student loans are probably the best type of loan for your education. While you should try to fund your college career with primarily grants, scholarships and savings, this is not always possible. So, if you have to go the loan route, federal student loans, such as Stafford loans or Perkins loans, are your best option.
So, what sets federal student loans apart from private loans and other loan types? To put it simply, federal student loans make the act of borrowing a much more pleasant experience. Loans that are funded by or guaranteed by the government give students a wider range of options in terms of repayment plans, interest rates and loan amounts.
Benefits of Federal Student Loans
Before you hop on over to your local bank, I’d seriously suggest checking out the benefits of federal student loans.
Lower Interest Rates
Because federal loans are funded by or guaranteed by the government, interest rates are significantly lower than private loans. The government makes it so there are controls on the interest of federal loans and helps to ensure students are not taken advantage of.
Flexible Repayment Plans
One of the biggest problems with getting a standard private loan is that you will have to start repaying it right away, even though you’re still in school. This can be next to impossible for students when their full-time job is more often than not studying, not earning money. Federal student loans recognize this problem, and allow students very flexible repayment plans. Most of the time, students will not have to pay back a cent on their loans until they have graduated college, and even then up to around six months after they’re graduated! Likewise, interest often does not accrue on federal loans, meaning there is no “punishment” of sorts for waiting until you graduate to begin repayment.
There’s a Guarantee
Most federal loan programs have a guarantee attached to them. This means that if you meet the basic requirements and uphold them throughout your college career, you will qualify and will continue to qualify for a federal student loan. Most requirements have to do with income ceilings and GPA.
How To Apply for Federal Loans
The key to securing a federal loan for your college career begins, as with all financial aid options, with the FAFSA. You will need to fill out the FAFSA before March 2 of the year you plan to begin attending college in the fall. The FAFSA will make you eligible for federal loans and grants. If you end up meeting the requirements, you will receive an offer for a federal loan in the mail, most typically the Stafford loan or Perkins loan. Other options include the Sallie Mae student loan and other low interest loans.
Once you receive a loan offer, you will need to fill out all of the appropriate paperwork and select a lender. Your college or university may suggest a lender and in these cases, it is wise to take their suggestion. Once all of the details are sorted out, you should receive notification of acceptance. Your loan money may be sent directly to the college admissions office to be held against your tuition bill. However, it is also possible that you will receive a check and will need to cash it and pay your tuition bill accordingly. If there is money leftover, this can be used for books, dorm fees, campus service fees and other related college expenses.
Food For Thought
One of the most important things to remember when it comes to federal student loans is that you do have to actually pay them back! It’s easy to just cash that loan check or watch that deposit go into your savings account and jump with glee in a spending frenzy. However, even though you get the money now and pay it back a few years from now, there is no excuse in the world to spend like a crazy person.
In fact, quite the opposite should be the case. If you end up having loan money leftover after all of your college expenses, why not put the rest in savings? This way, it will build interest and you will be ahead of the game come time to start repaying.