A Guide to Student Loans

With the cost of college rising every year, most students will need to take  student loans in order to pay for tuition and books. There are different types of student loans to choose from. There are advantages and disadvantages to each loan, so understanding your options will help you choose the correct student loan program for you.

Federal Stafford Subsidized Loans

Stafford loans are loans backed by the federal government. They are dispersed from a lender or bank. Subsidized loans do not require any interest to be paid while you are still attending school. The amount you can receive depends on your educational level and ranges from $3,500 to $8,500 per year.

Federal Stafford Unsubsidized Loans

Unsubsidized loans require the student to pay the interest payments while attending school. Some lenders allow you to defer them, but the interest accrues and is compounded, so it is usually wiser to make the payments. These loans are given in conjunction with the subsidized loans, and the amount varies depending on what year of school you are completing. The amount varies from $5,500 to $20,000 per year. The following requirements must be met in order to be considered independent, and if you don't qualify, you may not receive unsubsidized loans. Independent students may receive unsubsidized loans, whereas dependent students usually cannot since it is assumed they should have significant estimated family contributions. Dependency status is determined by the following criteria, not by tax dependency nor living situations.  You need to meet only one criterion, not all of the following:

  • Are 24 years old or older (Age does not matter if you meet the following requirements.)
  • Are married
  • Have children
  • Are enrolled in a master's or doctoral program
  • Are enlisted in the Armed Forces
  • Have an unusual family situation, such as being in foster care or homeless

 Private Loans

Students often supplement their federal loans with private loans in order to receive enough funds to cover pricey tuition. Private loans are any loans not offered by the federal government. These loans are given out by banks and credit unions. They are not as desirable as federal loans. They will carry a higher interest rate, which is often adjustable. The terms may be shorter, which means you will have higher monthly payments. And there is no real regulation, so you often are not getting a great deal. These are used when necessary but shouldn't be a first choice to fund your education.

PLUS loans

These are federal loans given to parents of dependent students. If you do not meet the test in order to receive unsubsidized loans, then your parents can apply for PLUS loans. They are taken out by the parents and paid back by the parents. If your parents don't qualify and are denied, then you will be able to receive the unsubsidized loans.

How to Apply

In order to receive any of these loans, you need to complete a Federal Application for Federal Student Aid, or a FAFSA. This will determine what loans you qualify for in addition to grants and work study programs. For private loans, you apply directly to the banks or credit unions.

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