Student loans are types of debt taken out by an individual to help cover tuition and living expenses at school. When it comes time to pay off this debt, they are given a certain number of years, called the repayment period, to make the payments. After paying off, they are no longer responsible for the debt.
Eligibility for Student Loans
Eligibility for student loans will vary by institution. Most schools have a set amount that they can hand out to each individual. Some schools lower the amount if you can get other forms of funding from your family, such as a parent paying for some college costs.
Some students may be eligible for federal student loans, which gives them more funding and is easier to apply for than private student loans. Students in their final year of school may also not be eligible for certain types of financing because they have already received enough aid from the school itself.
Students should speak with their financial aid office about how much aid they are eligible for. They should also research the maximum amount of aid they will receive during their academic career.
What are the 4 Types of Student Loans?
There are basically four types of student loans. Federal loans, private loans, state financial air and parent loans, otherwise known as the PLUS program. Here, we will break down each of these four student loan types, so you will make an informed decision.
Federal Loans
Federal loans are the easiest to obtain. Since they are “loans” from the government, students don’t have to worry about paying them back until they graduate and get a job. Most of these loans are also need-based, meaning that you will not be eligible if you can afford to pay for your education out-of-pocket.
Federal loan offers are based on specific criteria, including your expected family contribution (EFC) and financial need.
Private Loans
As their name suggests, private loans come from private lenders, not the government. However, they can still help pay for higher education expenses. These lenders may have a more significant interest rate than federal loans. People who desire to have a little more money to put towards their college education often use them.
State Financial Aid
Every state has its funding available for students’ education. These funds can be used to pay for school tuition in some cases. Check with your school’s financial aid office to see what type of aid is available in your state and how much you will be allowed to get. Some states also set aside funds for students with disabilities or at-risk populations who need extra help paying for college.
Parent Loans for Undergraduate Students (PLUS)
If you are a parent and want to help your child pay for college, you now have the opportunity to do so through the PLUS program. If approved, your student can get up to $4,000 in financial aid per semester. However, they will be required to pay their loan back within ten years of graduation or drop out if they do not complete their degree within four years.
For a parent to be eligible to take out a PLUS loan, they must show that they have a steady income and cannot afford the total cost of their child’s education without extra help.
What is the Most Common Student Loan?
The most common student loans are the federal Stafford Loans. Students eligible for this type of funding will have at least $5,500 in grants and other financial aid forms. This funding is awarded to undergraduate students.
These student loans are also given to students who attend graduate school, but they will have a smaller amount available to them. This can vary and change based on your state or institution’s regulations. It would be best to speak with your school about how much funding you are eligible for and how much you can receive for your education each semester.
This money does not need to be paid back until after graduation, but it does need to be paid back before you leave school if you do not graduate within four years.
Eligible students will have to fill out the Free Application for Federal Student Aid (FAFSA). Most of the paperwork can be completed online and submitted by mid-January. You can also choose to submit it electronically, but you will have to come in person to the federal office in the state that you live in.
How to Apply for Federal Student Loans and Get Approved
The FAFSA is separated into two sections. The first section is about your family’s financial situation and the expected family contribution (EFC). This section should be completed by all students, as they will not be eligible for any other type of aid if they do not complete this part.
The second section is where you fill out your personal information. This is where you will need to list all of the sources of income for your family, as well as the details about your assets and any debt. You can also include information about any savings that you may have.
You should bring a copy of all documentation to prove your family’s eligibility at the federal office. Federal student loans will not be disbursed until every piece of information is completed in the FAFSA and verified by your school.
After being accepted into college, all students can apply for private student loans if they want to receive one. These student loans are only for students in their last year of school. They can then use this loan to pay for the remainder of their education.
These loans should be used with federal aid and submitted before receiving your grant or scholarship money. The student must sign a promissory note, agreeing to repay the loan and have monthly payments deducted from a paycheck, if they have one, or directly from the bank account.