What are Student Loans?
Student loans are a specific sort of educational loan. Student loans are federally backed loans taken out by individuals or their family members in order to cover the cost of education at a four-year university, community college, trade school, or other qualified educational facility. These loans can cover tuition costs, fees, books, boarding, and many other educational costs. When the student takes out a loan, the lender defers the need to repay the loan until the student either completes their education or is out of school for a specific period. At that point, the student, or his family, must begin repaying those loans with interest. The critical key to these loans is only taking as much as necessary to meet education expenses.
Types of Student Loans
There are a few student loans commonly available. One of the more common and well known is the Stafford Loans for Students. This program allows the student to borrow funds directly from the US Department of Education. The student must be actively enrolled and attending classes at a four-year college, community college, or qualified trade or technical school. For student with financial need, a subsidized loan is available. This loan allows for deferment of the interest until a certain time. For students without a demonstrated financial need, an unsubsidized loan is an option. In these loans, the interest begins accumulating from the beginning.
Another one of the more common student loans is the Federal Perkins Loan Program. Universities determine which students are eligible for these loans based on financial need. These loans are available to both undergraduate and graduate degree seekers. Another common loan program is the PLUS Parent Loans. These loans make educational funds available through the parents' financial means. These loans cover tuition, fees, and room and board. The remainder can go to the parents or directly to the student. These funds must go towards a child's education.
The federal government also provides programs that can help repay student loans through service in certain areas such as AIDS research, NIH clinical research, contraception/infertility research, nursing education, pediatric research, and Indian health services. After completing education, the individual agrees to commit a certain amount of time to a specific field. In return, the designated federal agency will repay a certain amount of outstanding student debt and, in some cases, help cover taxes related to the debt as well. These repayment programs come after graduation. Each program has different criteria that a graduate must meet in order to qualify.
How to Apply for Student Loans
The entry point for all student loan programs is the Free Application for Student Financial Aid (FAFSA). This application form is a requirement for access to student loans and grants from the federal government. The Department of Education uses the FAFSA information in a formula to determine the amount of financial aid for which a student is eligible. That financial aid can include both grants and loans. This application form is the accepted standard for determining eligibility in many federal, state, and private grant and loan programs.
A student can fill out the FAFSA online quite easily. The information required includes providing contact information, identification, financial data, and education plans. If parents claim the student as a dependent, the student must also provide information on the parents' financial situation. All of this information goes into the formula the Dept. of Education uses and in the end, it spits out a Student Aid Report. That shows how much the student or family needs to contribute to the education costs and how much federal student aid for which the student qualifies.
The first loans go to students that need financial help. Those loans are likely going to be a Federal Perkins loan or a Federal Direct loan. Once the school determines if they have the funds for the student, they will provide the student with loan papers on which to sign. Once the student agrees to the loan, the funds go towards the student's educational costs such as tuition, fees, and room/board. If there is any money left over, the student can receive the rest as a check to use towards other education expenses like purchasing books or supplies
Students who do not meet the federal guidelines for subsidized loans have the option of taking out an unsubsidized Stafford loan. These loans also go through the student aid office at the university. Once the student signs the loan papers, the funds go first to their outstanding tuition, fees, and other educational costs. Any proceeds then go to the student for other educational expenses. All student loans require the students to use caution. Taking out too many loans can create a financial burden when they leave or graduate from school.
If someone has an interest in an education repayment program, the process is very different. These programs are not the business the financial aid office of a university. The individual must make an application to the appropriate federal agency offering these programs. The agency looks at the applicant to make sure they qualify for the program. That means having a degree in an appropriate field and having outstanding student debt. The applicant also provides an outline of what they propose to do as part of the program. This information goes through review to make sure it meets the program's criteria. If the application meets the criteria of the program, the applicant then signs an agreement to abide by certain requirements in exchange for help with their outstanding student debt.
Student loans are a good option for those that do not qualify for grants but cannot afford to pay cash for their education. The important thing to remember is only borrow the least amount necessary to meet education expenses. That will minimize the financial burden you have after graduation with your degree. This is even more important if you leave school without a degree. All student loans will start coming due for payment within a few months of graduation or leaving school without a degree in hand.
For more information on these student loans and programs, visit the following websites:
Grant Application Guides and Resources
It is always free to apply for government grants. However the process may be very complex depending on the funding opportunity you are applying for. Below are some of the published guides that have been helpful to past recipients: