Federal student loans are generally regarded as federal government loans which allow both students and parents or guardians borrow money from the federal government. As a matter of fact, a loan is an amount of money you borrow from either a lender or any financial institution and must be paid back with interest. Getting a loan might require you to provide some important information and you must be ready to agree to the terms and conditions of the lender.
As a student, you can get your Student loans from online lenders, federal government, local banks, and every other financial institution. But when you are getting your loan directly from federal government, then it is regarded as Federal student loans. Unlike loans from banks and other private institutions which comes with some strict conditions and even failure to repay back on due time may warrant prepayment penalties and even lead to bankruptcy in some cases. Federal direct student loans come with so many benefits which include student paying back the loan in the future after graduation, student can also get student loan forgiveness, and many others to mention but few.
Federal student loans are made available to students or parents when they are in college and this loan is issued by the U.S. Department of Education as the lender through the loan servicer known as Federal Student Aid, the largest provider of financial aid for college in the United States. Federal Student Aid will help you manage your student loans, apply for aid and any other financial assistance you want. However,
How Does Federal Student Aid Work?
Federal Student Aid is available in every college to help student get and manage their Federal student loans. All you need to do as a student or parent is to locate the financial aid office in your school to know every information about the loan you want to get, repayment options and every other resources you need to pay for college. Below are the simple steps the Federal Student Aid will guide you through when you want to apply for your student loans.
- Start Planning Early: you have to start planning how to pay for your college before you begin. You can do this by asking your school counselors and the college financial aid office about the state, college, and non-profit grant and scholarship you can apply for.
- Fill Out the FAFSA form: to apply for federal student loans, you have to fill out the Free Application for Federal Student Aid (FAFSA). This FAFSA will be used to determine whether you qualify for federal aid. Once you submit the form, you will receive your student aid report.
- Review your Aid Offer: you can review your offer when several colleges have accepted you. If you have been accepted to multiple colleges, the next thing to do is to compare the cost and aid offers from each school. This offer explains the amount and types of aid a college is offering you.
- Get your Aid: once you have compared the cost and various loans or aid offers. Then it is time to receive your Aid through your student account. But your college financial aid office will apply the aid to the amount you owe your school and send the remaining balance to your account which you can now spend on other college costs.
- Repay your Loans: before graduation, you will be required to repay your loan. Therefore, you need to start making plans on how to choose a repayment plans. The amazing thing is that, Federal student loan borrowers have a sic-mo9nth grace period to start making payment. However, if you are not able to repay your loan on due date, kindly contact your loan servicer to discuss other repayment options available.
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What are the benefits of Federal Student Loans?
Federal student loans have many benefits than other types of loans from private sources like banks, credit unions, and other online lenders.
- Doesn’t require a strong credit history: Most federal student loans do not make it compulsory for borrowers to have good to excellent credit history as a requirement to get loan. So if you have a poor credit score, you are likely to become eligible especially if you are just leaving high school for college and you don’t have time to build your credit.
- Doesn’t require a co-signer: Except for Direct plus loans, you don’t really need a co-signer to qualify for your federal student loans.
- Salary can be Used to Make Payment: your monthly income can be used as repayment plans for some federal student loans. This usually depends on the borrower’s monthly income and family size.
- It is Flexible: unlike other private loans, which must be repaid on the due date. Federal student loan is very flexible such that you can postpone or change your repayment plans even when you have received the loan and if you are not able to meet up with the due date or having challenges making payments.
- If you indicate your interest for financial need, the government pays the interest on some types of loan on your behalf while you are in school and during some period after school.
- Borrowers do not have to start repaying their federal student loans until after they leave college or drop below half-time.
- If you work in certain jobs, you may be eligible to get a part of your federal student loans forgiven if you meet certain conditions.
What are the Types of Federal Student Loans Available?
There are four types of Federal student loans that are available and they are;
- Direct Subsidized loans
- Direct unsubsidized Loans
- Direct Plus Loans
- Direct Consolidation Loans
Direct Subsidized loans: these are loans given to qualified undergraduate students who show their interest for financial need to help them cater for the expenses of higher education at a college.
Direct unsubsidized Loans: these are federal student loans issued to qualified graduate, undergraduate and professional student whose eligibility is not based on their demonstration of financial need.
Direct Plus Loans: these are loans given to dependent undergraduate students, graduate, professional students and parents to assist them in paying for education costs not covered by the other financial aid. To become eligible for this type of loan, you will have to undergo a credit check and it is based on financial need. Keep in mind that borrowers with poor credit history must meet other additional requirements to qualify.
Direct Consolidation Loans: this type of allow you to combine all your eligible federal student loans into one single loan with a single loan servicer.
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How to Get Federal Student Loans
If you want to know how to apply for federal student loans, the first thing to do is to complete and submit a Free Application for Federal Student Aid (FAFSA®) form. Once you submit this FAFSA form, your career school or college will analyze the result of your form to determine if you are eligible for the federal student loan and other financial aid programs like grant and work-study and then send you a financial aid offer which may include the federal student loans. Your school will explain how to accept all, or a part of the aid offered.
Before your receive your loan, you will be asked to do the following;
- You will be asked to complete entrance counseling, a tool to ensure you understand your obligation to repay the loan; and then
- Sign aMaster Promissory Note, agreeing to the terms of the loan.
Once you do this, kindly contact the financial aid office at the school you are planning to attend for required information regarding the process at your school.
What You Need to Know before Taking out Federal Student Loans
There are certain things you must put into considerations as a borrower before considering getting federal student loans even though you don’t have to start repayment of your federal student loans immediately.
- Know the amount of money you want to borrow and how much you can afford to pay back. This is to avoid any expenses that will affect your finances in the future. After you graduate, your salary will be cut out to settle a small percentage of your student loan payments. This is why it is so important for you to borrow the exact amount that can cater for your school expenses.
- Make enquiries about the starting salary in your career. You can do this by going to your school to ask for the starting salaries of recent graduates in your field of study to have an in-depth idea of how much you are likely to earn as salary when you graduate to sort out your debt. You can also make use of the U.S. Department of Labor’s Occupational Outlook Handbook or career search tool to research careers and salaries.
- Make your loan payment on time. It important you make your payment on time even before your repayment notice or reminder. Kindly make the full payment as regards the amount on your repayment plan.
- Always get in touch with your loan servicer. It is important you notify your loan servicer when you graduate; transfer to another school; change your name, address, or Social Security number withdraw from school; or drop below half-time status. If you are also having challenges making payment on the scheduled date, kindly contact your loan servicer and he or she will provide other payment options for you.
- Read, understand and agree to the terms of your loan and then keep copies of your loan documents for future records. When you sign your promissory note, you are agreeing to repay the loan according to the terms of the note even if you don’t complete your education, can’t get a job after you complete the program, or you didn’t like the education you received.
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