Finance Your Education With a Federal Loan

Obtaining a federal education loan to finance a student’s college education can help a student complete their education. Loans tend to be the last funding source that parents and students seek out because they have to be paid back, grants and scholarships are applied for first.

The two main loan programs offered by the federal government are the Stafford loan and PLUS loan program. Stafford loans provide students with a way to borrow a limited amount of funds for college. These loans have a capped interest rate and do not need to be paid until 6 months after the student graduates or leaves college.

PLUS loans can be applied for by parents and students and do not have a cap on the amount that can be borrowed. PLUS loans carry higher interest rates than Stafford loans and the loan balance is due while the student is in school. Applying for either type of loans requires the following steps:

Step 1: Complete the FAFSA

The FAFSA form, or the Federal Application for Federal Student Aid, is required by all aid applicants seeking any form of federal financial aid. The form can be obtained online from the U.S. Department of Education or a college or university. The FAFSA is used to determine the amount of aid that a student and their family qualifies for based on income and the expected amount that the family must contribute to school.

The FAFSA form should be completed online or electronically for quicker decisions, however, you can also print the form and mail it in for processing. Keep in mind that mailed forms will delay the decision process.

Step 2: Determine the Amount of Aid

The FAFSA will indicate the amount of financial aid that the student is going to receive. The difference between the aid amount, any scholarships, college savings and any other sources of funds, and the cost for the desired college or university will be the amount that the student and parent should borrow.

College costs should include all expenses that the student will incur during the year including tuition, fees, books, room and board, food and incidental expenses. Be sure to factor in all of these costs when determining the loan amount.

Step 3: Apply for the Loan

Apply for either the Stafford or PLUS loan program. The Stafford loan does not have a credit qualification, but does have an income limit. The PLUS loan requires the parents to have a good credit rating or a co-signer available for the loan application.

The application must be completed and filed with either the school, state or Department of Education, depending on the loan being sought.

A federal student loan provides funding necessary for a student to complete their college education. They should be used as a last resort for financing and students and parents should only borrow the amount necessary to meet their education costs.


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