Federal Financial Aid Loans
When it comes to big-ticket items you have to pay for in your lifetime, it does not get much bigger than higher education. Predictions are that college tuition will increase by about twice the rate of general inflation, year over year. This would mean, in 20 years, the average annual cost of tuition for a four-year public program would rise from today’s $5,132 to $19,859 and the cost of a private program from $20,082 to $77,711.
Nevertheless, help is at hand. For want to be college students who could benefit from a financial aid leg up in this department, here are some resources on what is available.
The ideal sources of funding for your child’s education are scholarships and grants that do not require repayment. Those lucky enough to qualify rarely receive enough to foot the whole bill though. Fortunately, there are several types of student loans. They are distinguished by various factors, including their interest rates, repayment terms, and maximum available amounts and whether the repayment falls on the student or his or her parents.
Some principal sources of student financial aid are:
* Federally funded student loans
* Parent loans
* Private student loans
* Other loans
* State financial aid
* Institutional assistance
The U.S. Department of Education’s Federal Student Aid (FSA) programs provide nearly 70 percent of all financial aid for American students. FSA is available to students — both undergraduate and graduate — enrolled in eligible programs at participating schools. In most cases, they are granted based on a student’s need.
Stafford student loans are long-term, low-interest loans regulated by the federal government. They are given to students and must be repaid with interest following the completion of their educational term.
A student’s financial aid need is calculated based on his or her expected family contribution (EFC), academic level and the anticipated cost of his or her education including tuition, room and board, and books. Worksheets that show how the EFC is calculated are available at www.studentaid.ed.gov/pubs, or you can request a free copy of the EFC Formula by calling 1-800-4ED-PUBS, and asking for the Federal Student Aid Handbook.
Students are required to begin paying off their Stafford student loan debt six months after they graduate, or after their enrollment drops to less than half time.
Stafford student loans come in two types: subsidized and unsubsidized. Interest accrued on subsidized loans during school is paid by the government. Borrowers have up to 10 years to repay their subsidized federal Stafford student loan.
Unsubsidized loans start charging interest from the moment the money is given to the student. Sometimes, the lender offers the borrower the option to make “interest-only” payments over the course of his or her time in school. Unsubsidized Stafford student loans can be used to supplement subsidized Stafford student loans.
Borrowers have up to 10 years to repay their unsubsidized federal Stafford student loans. However, they must pay interest while they are in school, unless they make arrangements to postpone or capitalize them at the start of the repayment period.
To be eligible for a Stafford student loan, subsidized or non-subsidized, you must:
• be enrolled as a full or half-time undergraduate, graduate or professional student;
• be a U.S. citizen or eligible resident non-citizen;
• meet financial need criteria as defined by the federal government;
• Sign an application and promissory note.
