So, you have decided to go to college. Congratulations, it’s kind of a scary step, isn’t it? Although you’ve probably already applied for grants , they may not be enough to pay for your classes, books and extra fees, especially if you’ll be needing to pay for child care. This is even more true if you count on having a full time paycheck, and now you’re missing a few hours from work each week to be in school. This may when you need to consider the possibility of getting student loans.
When you think of a student loan, you probably think of going to your bank and signing papers, just like you would with a new car. And you could absolutely do it that way, if your credit and income will support a traditional bank loan. However, a better type of debt that is easier to obtain is a Stafford or Perkins student loan. The Stafford student loan is often available in larger denominations, and presents with two different ways of accruing interest; therefore the Stafford loan seems to be more popular.
Stafford Student Loans
Stafford Student loans are available at more schools than the Perkins loan. Although both are needs based loans that do not require credit checks, the Stafford Loan is available as a subsidized or an unsubsidized student loan. Simply put, the subsidized student loan does not accrue interest while you are in school at least half time and the unsubsidized loans do.
An unsubsidized loan , since it accrues interest, will have a higher balance each month. However, if you like, you are given the opportunity to pay the interest each semester, which will prevent that occurrence.
In order to be eligible for a Stafford loan, you must:
1) Be in a qualified school that operates with the Stafford loans, at least six credit hours a semester. If you have not enrolled at the school, you will need to be accepted at the school in question.
2) Maintain at least a 2.0 GPA in those classes, and not drop more than 25% of your initial classes
3) Have submitted the FAFSA, or Free Application For Free Financial Aid
4) Be in good standing with all existing financial aid, including other loans, AND not owe any refunds on prior grants or loans
5) You must a U.S citizen or national, an eligible non-citizen, or a U.S permanent resident
6) Applications for subsidized loans must demonstrate a financial need, as certified by the school. Unsubsidized loans do not share this burden. After you graduate, drop out, or drop to less than six credit hours per semester, you have six months to begin re-payment.
Perkins Student Loans
Perkins loans exist primarily to help the needs of students who exhibit exceptional financial need. At an interest rate of approximately 5% as of 2010, this type of loan is an affordable way to pay for your college education, regardless of whether you are pursuing your undergraduate degree, or higher.
Perkins loans carry all of the same requirements that Stafford loans do, except that you cannot EVER have been in default on a student loan. Obviously, you have to pay back any loan that you take out, but Perkins loans give you three months more than a Stafford loan.
Perkins loans are administered and certified by the financial aid office at participating schools. They receive funds each year from the federal government, and occasionally add extra to it, then give out these limited funds to as many students as possible. When you receive the aid report that tells you that you are eligible for Perkins funds, you should contact the financial aid office as soon as possible. When these funds are gone, they are gone, and you will not be able to receive them.
Student loans are an effective tool to pay for education. Some individuals, if they are enrolled in a school with an extremely cost, will be able to combine two or more loans, along with work-study and grants. I found out the hard way my first year at college that simply checking the box on the FAFSA that indicated my interest in student loans was not enough. After your FAFSA results are complete, you will also need to complete a loan application ( that you obtain from your school) and do loan counseling. Otherwise, you will be like me and unable to buy the last textbook you need, for the first month of school. I wouldn’t advise it, it’s really not that much fun to study without a book.
Student loans are a debt that can almost never be disposed of if you were to declare bankruptcy in the future, and need to be paid back even if you are unable to get the job you want after graduation. You will also be responsible for paying your loans back if you do not believe that the education you receive is as good as you expect it to be. As with any type of debt, it is important to not borrow more than you need or can afford to pay back, and to fully understand the terms of your loan contract.