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Need Assistance with Tuition? Try Getting a Student Loan
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How to Get a Student Loan

There are many options when funding a college education. Some families begin saving from a young age in 529 plans or similar savings accounts. Some students get jobs and try to save up as much as they can for college. Other students apply for every possible scholarship available in the hopes of getting some funding for school.

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Despite their best efforts, there is still a good chance that students might fall short of what is needed to fund a college education. When all other options have been exhausted, students might begin to wonder how to get a student loan. Students might also wonder what options are available to them, and what the loan process entails.

Completing Your FAFSA Form

All queries into college financial aid must start with the completion of a FAFSA (Free Application for Federal Student Aid) form. This form will require tax, investment, and income information from both the student and their parents.

Colleges will use the FAFSA information to determine what financial aid packages they will offer the student. Once the FAFSA form has been completed, the college will send the student a financial aid package that could include grants, work-study, and loan options.

Grants are financial aid that does not have to be repaid. Work-study options provide students with an opportunity to earn money to go toward their educational expenses. Loans are an also an option for students in these financial aid packages. These have to be repaid with interest at the completion of the student’s college experience.

Federal Government Loans Versus Private Loans

There are two main options when borrowing money for college: a federal government loan, or a private loan.

For a federal government loan, the U.S. Department of Education is the lender. There is no need for a cosigner or a credit check with two types of these federal loans. Federal loans have fixed interest rates. These rates are often lower than private lenders’ rates.

A private loan is funded by a bank, credit union, or other financial institution. A private loan does require a credit check and may require a cosigner. This type of loan can offer either a fixed interest rate or a variable rate.

Types of Federal Loans

Federal loans are divided into three main categories: subsidized, unsubsidized and PLUS loans. Subsidized loans are based on financial need. The government pays the interest on these loans while the student is still enrolled in college. Unsubsidized loans are not based on financial need. The interest on these loans is not paid for the government. Students are eligible to take out both subsidized and unsubsidized loans.

Both subsidized and unsubsidized loans have lending limits ranging from $5,500 to $12,500 per year depending on the student’s year in college, and the student’s status as a dependent.

For students who are claimed as dependents by their parents, first-year students can borrow $5,500, second-year students can borrow $6,500 and third-year and beyond students can borrow $7,500. If a student is not a dependent, or if their parents cannot get a PLUS loan, then the student can borrow higher amounts.

These independent students can borrow $9,500 the first year, $10,500 the second year and $12,500 for the remaining years. The current interest rate for subsidized and unsubsidized loans for 2018-19 is 5.05 percent.

If subsidized and unsubsidized loans are not enough to fund the college expenses, PLUS loans can also be used. PLUS loans are loans that can be taken out by students or parents. These loans can be used for costs that are not covered by financial aid packages. The maximum amount eligible to be borrowed is the total cost of college minus any financial assistance received. The current interest rate for a PLUS loan is 7.6 percent. All federal loans also charge a loan fee that is a percentage of the amount being borrowed.

Paying Back Loans

For subsidized and unsubsidized federal loans, the student is not required to begin paying back the loans until six months after graduation from college. Additionally, if a student should choose to change their enrollment status to less than half-time or choose to stop attending college, they would be required to pay back the loans following a six-month grace period.

PLUS loans have no grace period and are to begin repayment plans after the funds have been disbursed in their entirety.

Multiple Loans

Students who have multiple federal loans have the option of combining these loans into one payment. This is called a consolidated loan.

Reapplying

Students are required to fill out the FAFSA form each year to see what they are eligible to receive from their respective school. Students and parents can then apply for more loans as needed.