While it is possible to secure a private loan for your post secondary education, Federal Student Loans are still the best resource for your college financial needs. These low interest Federal loans offer a substantial benefits as compared with private lenders. The controlled lower interest rates mean lower monthly payments and students are often eligible for extensions or deferments on repayment periods.
Another added benefit of low interest student loans is the subsidized nature of many federal student loan programs. If you secure a Stafford Loan or Perkins Loan, upon completion of your studies you may be eligible for loan consolidations that will allow you to extend your repayment schedule from 10 years to 30 years while securing a locked in low interest rate. In accordance with Congress' Higher Education Act both the Stafford and Perkins loan programs offer student loan forgiveness options that are available to graduating students who enroll in public service programs or take positions teaching in low-income school districts.
We've established that the preferred type of low interest student loan is a Federal loan. Now let's concentrate on the two types of Federal loans that offer manageable low interest rates and repayment plans along with other substantial benefits to students struggling to finance their higher education.
The Stafford is a low interest Federal loan that is designed to help students with little to no credit afford college. The Stafford loan is intended as a supplement to the students own financial resources, scholarships and/or grant money. As a Federal student loan the Stafford uses different criteria in granting loan applications than a standard lender like a bank. Rather than basing your worthiness on a credit score, it is based on whether or not you fall within the eligible income bracket, if you are attending school at least half-time and if you have no history of defaulting on a loan.
The Stafford loan program offers subsidized low interest student loans to qualifying applicants. The interest rates for the 2011 – 2012 school year are currently as low as 3.4%. The Stafford program also offers unsubsidized loans depending on the students needs. These unsubsidized loans are currently offering fixed interest rates of 6.8%. Of course whether you qualify for a subsidized or unsubsidized loan will depend on your circumstances as determined by your FAFSA application.
The Stafford Federal loan program offers borrowing limits up to $20,000 per year depending on the status of your degree and the number of years you have been in school. The Stafford also allows students to defer payment while they remain enrolled in college which means you can concentrate on your studies and give them your full attention. One of the prime benefits of the Stafford student loan program as it offers loan forgiveness programs for graduating students who perform public service or take up teaching posts in underfunded and low income schools.
The Federal Perkins Loan is another Federal loan program that provides opportunities for low income students. In order to qualify for this loan you need to show exceptional need. Most students that qualify for a Perkins loan are also eligible for the Federal Pell Grant program -another form of financial aid designed to help low income students realize their college dreams. If you qualify for this type of low interest loan, you will be pleased to know that it is subsidized as well. Perkins is currently offering low interest student loans at rates as low as 5%.
As with other Federal student loan programs you will be able to defer payment on your secured loan while you are enrolled in classes. Further deferments are available for students who are subject to greater economic hardships. Also,in accordance with the Higher Education Act of 1965, some loans may be eligible for loan cancellation in exchange for teaching services at low income schools.
The path to financial aid success starts with the FAFSA, the Free Application For Federal Student Aid. If you want to secure a federal loan—or even more preferably, a grant—then you need to have your FAFSA submitted by March 2 of the year in which you plan to begin the fall semester. Once your FAFSA is processed, you will receive a Student Aid Report or SAR, outlining how much money you and/or your family are required to contribute to your education.. A few weeks after that an award letter should arrive in the mail detailing what types of financial aid you have eligible for and how much money you can or will receive. You will then need to return this award letter indicating what financial aid you are accepting.
From there, you will need to follow the specific instructions for securing the type of low interest loan you've been offered. A Stafford loan requires that you sign and submit a promissory note, while a Perkins loan requires you to fill out paperwork and submit it directly to your school, as your college of choice will be the lender.
Regardless of the type of loan you end up getting, you should always note the interest rate. Even though you may be new to the world of finances and credit, lenders expect you to make responsible and informed decisions. Always educate yourself about a potential loan, even if it does have an enticing low interest rate, before you sign on the dotted line.