Federal loans for college

You don’t just have to rely on your ability to write stellar essays in your quest for financial aid. By filling out a Free Application for Federal Student Aid (FAFSA), you could be eligible for federal and institutional grants and loans.

First, learn some financial-aid terminology. The interest that you pay on a loan is an additional percentage of the loan that you pay for the privilege of borrowing the cash. An unsubsidized loan means that interest begins accruing on your loan as soon as the first payment is made to you. For a subsidized loan, the government pays the interest on the loan until after you leave college or drop below half-time enrollment (generally six credit hours).

There are several federal loans that can help you offset the costs of college: the Stafford Student Loan, Perkins Loan and Parent Loans for Undergraduate Students (PLUS).

Stafford Student Loans, which come in both subsidized and unsubsidized forms, are for at least half-time students who can’t afford all their expenses while in college, but who plan to be employed after finishing their degrees. Under the Stafford Student Loan, dependent students can borrow up to $2,625 per year as a freshman and up to $5,500 as a senior.

Perkins Loans are financial need-based loans (your college’s financial-aid reps decide if you’re eligible) that allow you to borrow $4,000 per year for your undergraduate degree. You must begin repaying a Perkins Loan nine months after college graduation.

Your parents can take out a PLUS Loan (Parent Loan for Undergraduate Students) to put towards the cost of your education. They can borrow the cost of your college education minus your other financial aid.

If you take out any loans, prepare to sign a promissory note, a document that acknowledges you accept the loan’s terms and conditions.

If you find yourself unable to make payments on your student loan, you have several options. Forbearance allows you to take a 90-day break from the repayment period. However, be aware that this option will cause you to have even more interest to pay by the end of the period. Forbearance is a last resort if you’re experiencing temporary financial difficulties.

A consolidation loan is another alternative. Consolidation loans combine all your student loans from various lenders into one new loan with one single payment. The payments are often more affordable than multiple loans, though a consolidation loan usually extends your repayment period by a number of years, thereby adding interest to the amount you owe.

Remember that your loans must be repaid within a specific period of time. The consequences of failing to repay can result in default, which can damage your credit rating and your chances of getting a car or a home in the future. If you decide to re-enter school for another degree, your student-loan payments can be delayed. Repayment will begin when you leave school again.

By reviewing your financial situation now, you may be able to contribute more from your pocket, thereby saving on the amount you must borrow. Examine all of your financial-aid options. Financial stability is one part of a successful future. By making intelligent financial decisions and managing your loans responsibly, you’ll be able to avoid overwhelming debt and be able to start your post-college life on the right foot.

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