3 Qualifications for Federal Student Loan Income-Based Repayment

Federal student loans are not necessarily easier to get than private loans. Many people make the assumption that these loans are offered to even bad-credit borrowers because they are often need-based. However, the Federal Student Financial Aid is only given if a borrower qualifies based on a number of strict criteria. If you qualify, though, there are many benefits, including flexible options for repayment. One repayment option many students elect is Income-Based Repayment, meaning a portion of a borrower's income each year is taken for student loans. This option requires standard qualifications plus those unique to the income-based program.

#1 Credit Worthiness

All federal student loans, even standard repayment loans, require you to be credit worthy. This is not based on you income or your family's income. Most private lenders use credit history to determine if you are credit worthy. The federal government will do the same thing; however, federal loans may be extended to those individuals with a lack of credit history. It is important that you have not defaulted on a previous loan, especially a government loan. It is also important that you do not have too much debt or irresponsible debt habits. However, if your credit score is low because of your age or the fact you have not taken loans in the past, you may still be eligible for a student loan.

#2 Full-Time Enrollment

Only full-time students can qualify for federal financial aid in most areas. This is a result of how the loans are distributed. Instead of being deposited into your account so you can pay the college, they are given directly to the college to cover only the cost of your tuition on a term-by-term basis. If you are not enrolled as a full-time student, a status that is defined by the number of credit hours you are taking in a term, then federal loans will not be an option for you. This can be difficult for students considering part-time continuing education. There are other continuing education programs that may help with this need, but most federal student loans, like Stafford Loans, Perkins Loans and PLUS Loans, will only be extended to full-time students.

#3 Financial Need

One unique qualification for the income-based repayment option is financial need. Income-based repayment is a form of subsidized loan. This means you will not be required to make payments while you attend school, and there will be a grace period after graduation. Subsidized federal loans are available only to students who qualify based on need. All students can apply for unsubsidized loans, but they will need to make payments regardless of whether or not they have an income. Of course, financial need can change while a loan is active. For example, if you apply while you are still being supported by your parents, your parents' income will be used to determine your need. As you graduate, you may no longer have this support. Your income could then qualify you to refinance to the income-based option.


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