In order for you to have access to quality higher education, you have to be financially stable. Of course, you need to pay for your tuition, miscellaneous fees, learning materials and other fees. However, most families cannot support the education of their children, that’s why they resort to student loans.
Student loans are convenient ways to help students afford education. It is a form of a good debt, as an investment for the future. According to the latest statistics of student loan debts in 2017, there are more than 44 million borrowers in the United States, amounting to over $1.45 trillion student loan debt. That’s huge!
This just means that more and more students are taking advantage of student loans to support their education. There are two sources of student loans – the government and private lenders. In 2017, about 42.3 million borrowers or almost 97% of the total population of student borrowers apply for a federal loan.
Federal Student Loan
The federal student loan is probably the most convenient student loan. As long as you meet all the basic eligibility requirements, then you are qualified for a federal student loan. They also come with lower interest rates than private student loans and have a more flexible payment terms. The federal government also provides at least a 6-month grace period for graduates before they start paying their student loan debts.
In the United States, a total of $1,331.7 billion has been borrowed by students in the second quarter of 2017.
Types of Federal Student Loans
If you are thinking of getting a federal student loan, you should consider knowing the types of student loan programs offered by the government.
Perkins loan is one of the best choices for students. They feature a low, fixed interest rate and are available for student borrowers regardless of credit score. For undergraduate students, they can receive at least $5,500 per year cap, with a cumulative limit of $27,500. For graduate students, they can enjoy an $8,000 per year cap. The current interest rate is 5%. It also has a longer grace period of nine months.
However, the Perkins loan program will shut down on September 30, 2017. Nevertheless, all students who applied for Perkins loans for the school year 2017-2018 will continue to receive disbursements for the remainder of the academic year.
Stafford loan is considered to be the most popular government loan program since they can be used to pay for college education whether or not you are financially unstable. It also available for both undergraduate and graduate students.
Subsidized Stafford Loans
For the subsidized level, you will make payments after you graduate. For the meantime, the government pays your interest while you are still studying. For the academic year 2017-2018, the interest rate is 3.76%. Subsidized Stafford loans are provided to those who have real financial needs.
Unsubsidized Stafford Loans
In the unsubsidized level, you are responsible for paying off the interest. Similar to subsidized Stafford loan, they have a fixed interest rate of 3.76%. The limit of its loan ranges from $5,500 to $12,500. If you are more financially stable, you are eligible for a higher student loan.
PLUS loans are designed for both parents and graduate students. PLUS loan is being offered to parents of dependent undergraduate students while a GradPLUS loan is provided to graduate students who wish to support further their education.
PLUS loans are being funded by the federal government. For 2017, they have a fixed rate of 6.31%. Moreover, mostly they require a good credit score and are less flexible in their payment terms.
A consolidation loan is basically a combination of multiple student loan programs. Instead of paying for multiple loans, the payment is single. It also comes with a fixed interest rate and more flexible repayment terms, depending on the financial capability. There is no charge in consolidating loans. In fact, consolidation loans can lower your monthly payments, however, it can extend the time needed to pay off your loan. Further, there is a possibility that you can lose the benefits of a single loan program once consolidated.
Criteria to Qualify for a Federal Student Loan
Before you can be eligible for a federal student loan, there are standards requirements that you should accomplish.
Social Security number
You should have a valid Social Security number. SSN is a 9-digit number issued to (1) US citizens (2) permanent residents and (3) eligible nonimmigrant workers in the United States. You may obtain this by applying on Form SS-5 or the Application for A Social Security Number Card. For non-US citizens, you may read this government document.
Be a citizen
Immigrants who are undocumented are not allowed to receive federal or state aid. Permanent residents who have acquired green cards can apply for federal student loan. If you wish to be naturalized, you should apply for naturalization (Form N-400). To know more about how to become an eligible citizen, read this.
High School diploma
In case you do not have a high school diploma, you can present a General Educational Diploma (GED) or a certificate issued from a homeschooling program or institution.
Enrolled in an eligible school
You should also be enrolled in a school that is accredited by the federal government to receive student financial aid. There are some schools that are either unaccredited or do not want to receive federal aid.
A FAFSA or Free Application for Federal Student Aid is a form that should be completed by prospective college students (undergraduate and graduate students) to determine if they are eligible to receive a federal financial aid.
Good Federal Loan Standing
It is also a requirement that you do not have a bad history with any federal government programs. Students, and sometimes their parents cannot be in default on other federal loans.
2.0 Cumulative GPA
Students should maintain a 2.0 cumulative GPA. If they cannot maintain this grade requirement, they may lose their financial aid until their grades improve.
For male students between 18 to 25 years old, they should register with the selective service to be eligible for student loans. On the other hand, students must also be considered on a part-time status for them to receive federal aid. Each college institution will determine what part-time and full-time are. You can visit your financial aid office and ask how many credits you’ll need to take.