Student loans are a form of financial aid that may become necessary to help students meet their educational goals. Even students qualifying for gift awards often find it almost impossible to complete their college careers without obtaining a student loan of some sort to help pay for a portion of the financing. While student loans are not free money and must be paid back in full, these loans offer interest rates and fees that the student status provides that would not typically be available to first-time borrowers.
To be eligible for a student loan, you must be a citizen of the United States or a permanent resident, have enrolled in to attend school on at least a half time basis, and have filed a Free Application for Federal Student Aid (FAFSA). Your FAFSA will determine which student loan programs you qualify to receive. Your eligibility for the type of loan may vary, but you will qualify for a student loan regardless of the amount of income you or your parents make.
There are several types of student loans that you may qualify for. These include:
Federal Subsidized Stafford Loan: This type of student loan is based on financial need. The government pays the loan interest while you are in school and you will not accrue interest on this student loan until six months after you graduate.
Federal Unsubsidized Stafford Loan: This type of student loan begins accruing interest from the date the loan is disbursed to the school. You do not have to repay this student loan until you graduate and you have an option of making interest-only payments while in school. If you allow the interest to accumulate, your total amount to repay will be higher than if you would have paid the interest all along.
Federal Parent Loan for Undergraduate Students (PLUS): This type of student loan is for parents who have dependent undergraduate students enrolled at least half time. In order for parents to qualify for this loan, they must be citizens or eligible non-citizens of the United States, may not be in default or owe a refund to any FSA Student Independent program, and have a good credit rating. Soon after the loan is disbursed to your parents, they will begin repaying both the principal amount and the interest while you are in school.
Alternative Loan: This type of student loan is offered in addition to the Federal Stafford Loan and PLUS Loan programs. You and/or your co-signer must have a good credit rating to qualify for alternative loans. Interest rates, fees, and incentives will vary with lenders, so be sure to shop around to find the lending institution that will best serve your needs.
Before signing the legal documents to apply for a student loan, carefully evaluate the repayment schedule to determine if you will be able to abide by its conditions. If you do not believe you will be able to meet the repayment conditions, you might want to consider borrowing less and sticking to tighter budget while attending school.