How to Understand the Various Student Loans Available

Preparing for college can be an overwhelming process for most students, especially when it comes to figuring out how to finance their education. Luckily, there are multiple options for student loans for those who are in need of financial aid. Before applying for financial aid, it is important to understand the various student loans that are available.

Instructions

Difficulty: Moderately Easy

Things You’ll Need:

• computer

1. Apply for student aid. Once you have completed a Free Application for Federal Student Aid (FAFSA) form, you will be eligible to receive student loans. A Student Aid Report (SAR) will then be sent to you in the mail helping you determine which loans you are eligible for.
2. Contact the schools you may attend. Research the financial aid options at those schools. Find out information to determine eligibility for student loans. Financial aid administrators will review your SAR upon request.
3. Know the difference between the federal loans. A Stafford Loan is available to nearly all students, with a maximum of either $23,000 for dependent students, and $46,000 for independent students. The Perkins Loan is awarded to students with exceptional financial need. A limited amount of money is allocated to the school and then distributed by the school to the most needy students.
4. For subsidized Stafford loans, the U.S. Department of education pays interest while the student is in school. For unsubsidized Stafford Loans, the borrower is responsible for the interest.
   
   PLUS loans are available for parents of dependent undergraduates.
   
   
5. The Federal Pell Grant is available to undergraduates with exceptional financial need and does not need to be repaid.
6. PLUS Loans are available to qualifying parents. These are federal loans aimed at helping parents subsidize their children's education.
7. Work study is availble for both undergraduate and graduate students.
8. Identify and research which loans are available through private lenders.

Tips & Warnings

• Remember, you can be an undergraduate, graduate student or parent to borrow money to pay education expenses.
• Loan amounts often depend on your grade level in school.
• Federal Perkins and Federal Pell Grant are for students who are in the greatest financial need. Stafford Loans are for students who have substantial ability to repay their loans and are summed up through Ford Federal Direct Loans (paid back to the Department of Education) or Federal Family Education Loans (paid back to private lenders).
• Beware of scams that will ask you for a fee when applying for scholarships, or requests for a fee for searching for financial aid. There are specific laws that prevent you from this type of scam. There are such sites as www.fafsa.com NOT to be confused with the government run website, www.fafsa.ed.gov. Fafsa.com asks you for various fees you do not have to pay.