When Should You Apply for Student Loans?
Scholarships and grants are the first choice of most students seeking financial aid. The primary benefit of scholarships and grants is that they do not have to be repaid. In some instances, however, a student loan is the best option. Assess your situation to determine whether you should apply for a student loan.
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No Other Options
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If you have a high Expected Family Contribution (EFC), you may learn that student loans are your only option. In this case, federal education loans may be offered. An unsubsidized Stafford Loan is a common federal loan offered to students without financial need. According to StaffordLoan.com, interest on your loan begins accruing when the loan is disbursed to the school. This means you can begin making payments on your interest while in school to save money on loan payments after graduation.
Classes May Be Cancelled
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Students with demonstrated need do not always receive financial aid packages that cover 100 percent of their education costs. In this instance, a student may have tuition payments due that will remain unpaid without the help of a loan. Unpaid tuition can lead to cancelled classes. If your aid package is short, apply for an education loan immediately to supplement the difference. Your school may have specific loan programs for students in need who need emergency aid. Generally, these loans are from private lenders.
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Planning Ahead
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To qualify for financial aid, you must submit the Free Application for Federal Student Aid (FAFSA) or Profile each semester. If your family's financial circumstances change during the course of the academic year, you may need to apply for student loans to ensure you are covered the following semester. For example, if you received aid due to your family's temporary loss in income, but your parents regained financial stability during the semester, you should expect your financial aid package to decrease. Research loan options in advance to find the best rates and terms.
Considerations
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Unlike federal loans, private education loans can be obtained throughout the school year. The downside to private loans, however, is they often take into account the borrower's credit history. Borrowers without established credit history may be required to get a cosigner for the loan. Interest rates on private loans can be up to three times the amount of federal loans.
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