Advice About Student Loans
Many students find that their scholarships may not adequately cover all of their college expenses. On top of tuition and books, you will find that you may need to pay for parking, orientation, meal plans, housing, travel and other necessary items. Student loans can help fill the gap, but which one is right for you?
The first step is to complete the Free Application for Federal Student Aid (FAFSA). Once completed, the FASFA can be sent to any institution you are considering for college. The information contained in your FASFA will determine your eligibility for federal student aid and help the school(s) assemble a financial aid package, which may include grants, scholarships, work-study programs and a recommended student loan amount. The school may suggest which loans are best for you, including Direct Subsidized Loans and Direct Unsubsidized Loans.
Direct Subsidized and Unsubsidized Loans
Direct Loans (most commonly referred to as Stafford Loans in the past) include subsidized and unsubsidized loans. Subsidized loans are for undergraduate students with financial need. The government pays the interest while the student is in school (at least halftime), for the first six months after the student leaves school (also known as the grace period), and during authorized periods of loan deferment. Unsubsidized loans are available to undergraduate and graduate students, regardless of financial need. Students are responsible for paying the interest that accrues during all periods.
PLUS Loans are typically taken out by graduate and professional students or by parents who are borrowing money on behalf of a child. Eligible students or parents may borrow the
total cost of attendance, minus any financial aid from other sources, such as grants and scholarships. However, a credit check is required and the borrower must qualify for the
loan either alone or with an endorser (co-signer).
Another option is a private student loan or alternative loan. Generally, private student loans carry a lower interest rate than credit cards and can be used for other college expenses, such as housing or study abroad. Each lender has its own set of application forms to complete as well as its own requirements, which may include a co-signer, a credit check, and/or income-to-debt ratio check performed on the borrower, co-signer, or both. These loans are not federally guaranteed and may take several weeks to process. Note: Private loans often have higher interest rates than most federal loan options. It is recommended that you consider all of your loan options, including those that give you the lowest interest rates possible.
Finding a Lender
When it is time to choose a lender and a loan, don’t choose blindly. You can consult the financial aid office at your college to find which lenders they recommend, or visit your local bank to inquire about any student loan products they might offer. It is always a good idea to do some private student loan research on your own to find a lender that is right for you.