Federal student loans are often financed by the government, and offer advantages and benefits for consumers, as they have greater repayment flexibility than personal loans.
1 What is the FAFSA
FAFSA, or Federal Application for Federal Student Aid, is a form that the United States government offers to students or parents of students, who must complete the information to know if they are eligible for this loan.
With this application, applicants for the benefit will be able to access state grants, funds for work and study, and federal student loans, which represents an important benefit for most people.
2 Principal and interest rate
The principal and the interest rate are two terms that must be considered when applying for a loan; that is, the beneficiary will need to know how much money he will borrow and how much will be the total to pay.
The interest rate will be set by the government, unlike personal loans, which can be affected by other factors such as the payment term. Student loans often have low interest rates.
3 How the credit score influences
The credit score of a person allows to identify the economic solvency of this, thus translating the capacity with which it has to pay the requested loan on time.
With the credit score it is possible to access different loans, and although it is important to take into account that this characteristic positively or negatively affects the approval of a credit, in the case of student loans the credit score is not an impediment to obtain the loan .
4 About Federal Student Loans
Federal student loans are funded by the government, which has a mission to offer flexible plans that do not negatively affect beneficiaries.
One of the main advantages of federal student loans is that they can choose to suspend the payment plan for a specified time; this, in case they are unemployed or are going through an unstable financial period.
5 Types of Loans: Subsidized or Unsubsidized
When applying for a student loan with federal funds, the beneficiary has the option of choosing between two modalities: with or without subsidy. The former are characterized by being specifically directed towards students with the greatest economic needs.
Unlike subsidized loans, in loans that do not have this benefit, the government will not pay the interest during the time that the person is studying.
6 Perkins Loans
The Perkins Loan refers to the Federal Perkins Loan Program, designed especially for students who are in dire financial straits.
This is a limited program that is not offered in all institutions, but the recipient can access numerous benefits, the highest of which is the fixed interest rate of 5%.
7 PLUS loans
What are PLUS loans? These are aimed at favoring people who want to study a postgraduate degree or who have children at university. They are awarded through the Department of Education.
The benefit of a PLUS loan is found in the fact that the requested amount of money is delivered directly to the school for academic and living expenses of the student while they are enrolled in the university.
How to qualify for a federal student loan
1 Determine if you qualify for a federal loan
One of the main requirements to obtain a student loan is to be enrolled in an eligible program at least part-time, in addition to being a US citizen or being considered eligible to receive the loan.
In addition, it is essential to maintain a satisfactory grade point average and demonstrate the need to access the loan, by filling out different forms.
2 Estimate how much you can receive
This will depend on the university you want to access, which will provide online tools to calculate the financial aid to which the future student has access.
There, you will have to answer specific questions that take into account the number of family members of the student, the degree of studies to which you want to enroll and the contribution that this has in the family budget.
3 Make a budget of how much you can afford
Before applying for a student loan, a key piece of information to consider is the amount of money you have and how a particular payment plan will affect a person’s finances.
The questions to ask when preparing this budget should consider a person’s expenses, the reductions that can be made in other expenses, and an emergency plan in case of going through a financial crisis.
4 Fill out the FAFSA
To complete the FAFSA form, it is necessary to have data such as social security number, copies of tax returns, proof of income and bank statement, among others.
The FAFSA forms must be completed and submitted before 11:59 pm Central Time on June 30, 2021. If there is any update in the information, the deadline will be September 11, 2021.
5 Accept your loan
What is the best option to accept a student loan? The Federal Student Aid program suggests that the best way to optimize resources is by creating a hierarchy in the financial aid received.
Thus, the first thing that must be accepted will be scholarships and subsidies, that is, free money; then you find the money earned through work-study programs; lastly, the money borrowed through federal student loans is located.
Private student loans, an option?
Private student loans are an excellent option for students who do not meet certain requirements to access federal aid, but who do need to use the loan.
One of the advantages of these is that most private lenders do not limit the amount that can be accessed; Interest rates range from 2.80% to 12.78%, although these will depend on the institution that grants the loan.