Getting a Student Loan: If you are a student who wants to earn a degree but may be facing some financial challenges, then this loans information is for you. It is a fact that borrowing a large amount of money just to earn a degree can be intimidating; however, borrowing for school is worthwhile.
As a student, you just do not want to borrow more than necessary, so always look into other ways to keep costs down, including scholarships, grants, and working while in school to avoid over-borrowing.
It is also important that you understand different kinds of student loans available to you so that that you can look around for loans with the best repayment options. This article covers where you can get student loans, as well as the types of loans you should apply for first.
Types of Students Loans
If you need money for college expenses, you need to know what your borrowing options are. The two most common loans are federal student loans and private student loans.
– Federal Student Loans
As the name implies, federal student loans are loans the federal government funds to help students or parents pay for the cost of a college education.
There are three types of federal student loans. They are all provided by the government through the Federal Direct Loan Program. They as follows;
- Direct Subsidized Loans which are based on financial need.
- Direct Unsubsidized Loans which are not based on financial need. They are not credit-based, so you do not need a cosigner.
- Direct PLUS Loans which are credit-based, unsubsidized federal loans for parents and graduate/professional students.
It is important to consider federal student loans before you take out a private student loan. This is because there are differences in interest rates, repayment options, and other features.
– Private Student Loan
A private student loan is a financing option for higher education in the United States that can supplement, but should not replace, federal loans, such as Stafford loans, Perkins loans and PLUS loans.
Private student loan is pertinent when you have explored scholarships, grants, and federal loans, and still need money for college. This loan is issued by a bank or other financial institution.
Private student loans are taken out by the student and are often cosigned by a parent or another credit worthy individual.
Things to Know when Getting a Student Loan
1. Try to Not Borrow from People too much
It is easy to borrow money from people, but it is not always easy to pay it off later. Yes, education is an investment, and it is often well worth it to borrow money to fund your education than to borrow for frivolous things
2. Know Your Options
When borrowing for education, you have several options. Make sure to consider all of them and choose the one that fits you the best. Be sure to consider loans offered under government programs. This is believed to be generally your best option).
Also consider private student loans. This is typically used after you have borrowed the maximum from government programs.
3. It may Interest to know that you have to Start with Government Loans
Student loans from government sources are probably your best bet. These loans will generally have lower interest rates, and some of the interest may be paid (subsidized) on your behalf while you’re in school.
There are several benefits to government-backed loans including them being easier for you to qualify and have flexible repayment structures.
How to Get Federal Student Loans
To get a student loan as part of a government program, you have to visit your school’s financial aid office. Let them know that you would like to borrow some funds. They will tell you what steps to take.
You will have to fill out a FAFSA form, to determine what type of aid you are eligible for. To complete the FAFSA, you will need to provide details about your finances: your assets in bank and investment accounts, income levels, etc.
After your FAFSA is processed, you will get a financial aid offer from your school. You can accept the offer, or pass if you have decided to take another route.
However, it should be borne in your mind that you have to start and have the end in mind. As such, as you apply for loans, always remember that you will have to repay them someday. Run some numbers to understand what you are getting yourself into.
Before you pull the trigger on getting a loan plug your loan details into a loan amortization calculator, and see how much you will have to pay each month, and how much you will pay in interest over the life of your loan. This is an important part of your education.
Steps to Taking a Loan
Below are some of the things to put into consideration when getting a student loan:
1. File For Federal Aid Early Using Old Tax Returns
Even though this seems like a routine thing to do, more than 2 million people do not file a free application for Federal Student Aid, better known as the FAFSA. Sometimes parents and students do not know about this form. Some parents may be unwilling to provide their tax return information, which is used to determine eligibility for student aid.
Filing the FAFSA can be particularly important for students whose families have little or no money to pay for college. In these cases, students may be eligible for the federal Pell Grant program, which is awarded to students with significant financial need and does not have to be paid back.
Filing the FAFSA may also be required for other financial aid that students get from the state or the college they plan to attend.
2. Try to Understand Different Types of Loans
Loan options include federal loans, private loans from banks or credit cards. Federal loans are typically your best option. This is because federal loans often have low fixed rates. Federal loans also have provisions for deferment, a time period where your loans do not accrue interest.
You may see options for subsidized and unsubsidized loans. Subsidized loans are funded by the government and offer better terms. They are based on need and do not accrue interest while you are still in school.
On the hand, private loans tend to have higher interest rates, although rates for these loans and credit cards can fluctuate. Private loans also do not allow for participation in government repayment programs.
3. Contact your Financial aid Adviser
Endeavor to call the financial aid office to figure out who is your assigned financial aid adviser at the school you plan to attend. This person will be able to help you better understand your institutional aid package.
4. Understand the impact of debt
Taking out loans for college can be an investment in your future, especially when loan money allows you to work less and to focus more on coursework to complete your degree in a timely manner. Research consistently shows that a college degree is worth the cost.
However, students taking out loans should be conscious of how much they are borrowing. Unfortunately, many students do not know how much they owe or how student loan debt works.
Additionally, taking on a significant amount of debt can have other long-term implications. For instance, debt can hurt your ability to purchase a home or move out of your parents’ home.
5. Know your Repayment Options
When taking a loan, try to know your repayment option. In thinking about your repayment options, there are many factors that may influence how much money you might make after college, including your major and career path.
Since your future salary can influence your ability to pay back loans, it is important for borrowers to have a sense of earnings across different fields and industries.
In a Nutshell
Thus, getting a student loan; whether federal or private, is not a rocket science. In other words, it is very easy, but you have put some things into considerations.