What is a Student Loan? Where to Get a Student Loan?
With the cost of higher education continuing to rise every year, most students will need to take out one or more student loans in addition to any scholarships and grants they may receive. The purpose of a student loan is to pay for the cost of tuition, books, room and board, apartment rental and other fees associated with attending college.
Prior to starting the process of applying for student loans, the student and his or her parents should search for any type of scholarship or grant that may be available. Scholarships are usually dependent on grades, community service and leadership potential, although they may also be targeted toward first-generation college students, those with a particular disability or another qualification of the donor’s choosing.
Potential students who are interested in finding out what types of financial aid they qualify for first need to fill out a Free Application for Student Aid (FAFSA). The FAFSA can be found at any high school or college, or future students may log onto the government’s website and fill it out there.
Approximately two to four weeks after filling out a FAFSA, the student should receive an award letter from the federal government detailing which type of education loan he or she is eligible to receive. There are two types of student loans that the government provides, the Stafford and the Perkins. If the student is eligible for any grants, which is money that does not have to be paid back, this will also be stated on the FAFSA.
There are numerous qualifications in place to receive a Stafford loan, including having a high school diploma, being a United States citizen, not having been convicted of a crime and things of that nature. The student must also show financial need in order to get a Stafford loan. The Stafford loan can be offered to the student as either subsidized or unsubsidized.
With a subsidized student loan, the student is not responsible for paying interest while in school because it is paid for by the federal government. After graduation, the student must pay both the principal and the interest. With an unsubsidized student loan, the student is not required to pay the principal until after he or she graduates. However, the student must pay the loan interest while still in school. The Stafford loan is intended for undergraduate students only.
The Perkins loan is a government education loan that is granted to students who demonstrate extreme financial need according to the FAFSA the student completed. These interest rates on this type of education loan are typically lower than other types of government student credit. Perkins loans can be used for graduate and professional programs as well as undergraduate courses.
The PLUS loan is a government loan that is issued to parents of college students. The parent applying must have a good credit rating and is responsible for repaying the loan, not the student. To be eligible for a PLUS loan, the student must still be a dependent of the parent.
There are several benefits to receiving student loans through the government, including delayed repayment and a lowered interest rate. Both students and parents need to be aware that student loans must be repaid, and the government is very aggressive about collecting on them. They can not be discharged even if the student or parent files bankruptcy.
Even after receiving student loans, grants or scholarships, the new college student may still face additional expenses and may wish to apply for a private student loan with a bank or credit union. The bank or credit union the student or his or her parents already use is a good place to start.
Since most traditional students are young adults between the ages of 18 and 22, they may not have had the opportunity to build a credit history yet and may therefore have difficulty qualifying for student credit on their own. Having a parent co-sign is one way to increase the odds of being approved for an education loan. If students who are interested in a private loan don’t already have a bank in mind, they may be able to find a private lender at the website www.finaid.com.