How Do Student Loans Work? An In-Depth Q&A Session
Are you overwhelmed by the massive amounts of information concerning student loans? Do you need a simple explanation of how they work, what they do, and how to make the most out of them?
Finances, loans, and debt are never a fun subject, and it’s one of the leading causes of stress in America, but it doesn’t always have to be so hard. All of your questions have the answers you seek about your student loans.
What Is The FAFSA?
You must learn now if you haven’t heard about the FAFSA yet. FAFSA stands for Free Application for Federal Student Aid.
Most high schools recommend and encourage you to fill one out during your senior year as soon as possible. It’s the best way to access student loans and pay off your college so you can get the education you need to get started in this world.
How Do I Get The FAFSA?
Getting your FAFSA filled out is extremely important to your career as a student. Unfortunately, not everyone realizes the importance of this form, but it can be life-changing. Follow these steps for filling out your FAFSA.
- Please fill it out ASAP! Financial aid is usually first come, first serve. Therefore, you should fill out your FAFSA as soon as possible to get the most benefits in the new year. Failure to get yours promptly could result in being approved for no money.
- Please fill it out every year! Then, each year you are in school, you’ll have to complete the form and submit it. Yes, this can be frustrating, but your school should have a financial aid office to help you.
- Please fill it out completely! Don’t leave any empty spaces and give accurate and complete information.
- Gather your documents! Be fully prepared to submit many documents with your FAFSA, from bank statements to W2 forms to pay stubs. They need to know about your financial situation, so be timely in your gathering.
Types Of Student Loans
After you have submitted the FAFSA, you can be approved for several different loan types. Each will offer a few other options, and it’s up to you and your family to decide what works best for you. Pay close attention to the differences between each to ensure you get the best option.
- Stafford Loans: Low-interest loans offered by the government. Some are subsidized, and some are not. These work on a needs basis.
- Parent Loans: these are loans given by the state to the student’s parents and must be used only for necessary school expenses.
- Perkins Loans: The school you attend finances this loan, but it is capped out at $27,500 and comes in limited quantities.
What Is The Difference Between Subsidized and Unsubsidized?
Among many terms you may have never heard of, subsidized and unsubsidized will appear quite often. These refer to two different loan types, and you will qualify for either one or the other.
Subsidized loans do not charge you interest while in school and have a grace period before the APR. After that, the government covers these fees for you until the grace period ends.
Unsubsidized loans are the opposite, and you begin to acquire interest from day one.
It’s improbable you’ll be able to pay off your student loans before a grace period with subsidized loans ends, so the less interest you have to pay, the better. This is why subsidized loans are preferred, if possible.
How Long Does It Take To Get Your Student Loan?
Depending on the loan type, it can take a week to a couple of months to send the funds to you or a refund check. Your financial aid depends on the loan you took out, how much you qualified for, and other factors relating to these details.
How To Find Out Where Your Student Loans Are
It can be surprising how many people aren’t sure where their student loans came from, how to pay them, or the exact process. Losing focus and forgetting details is common, especially as a stressed college student suffering from long study sessions fueled by Ramen and Monster.
The National Student Loan Data System holds all of the information concerning your student loans, and you can access this by clicking on the financial aid tab. You’ll have to create an account and log in, but it’s a secure site, so it’s entirely safe to do so.
All the information concerning your loans will be available, from interest rates to loan dates. But, of course, it’s open to access at any time, too.
4 Helpful Tips For Choosing Your Student Loan
Simply the process and discover student loans more easily by following these tips to end the stress.
1. Compare interest rates
Don’t ever accept a loan without considering all your other options. It may take some math and calculations, but every little decimal counts. Think long-term and compare the different rates included in your loan offers.
Since most loan terms can extend up to 30 years after graduation, paying attention to even a dollar difference in your monthly payments can make a huge difference. Do some window shopping.
Many schools will also offer assistance in applying for and receiving loans. Take advantage of this!
2. Consider debt consolidation
Many private loan companies offer extensive debt consolidation loans. But, again, it knows when you can consolidate student loans and the best time to help you decide if this is the best option.
Debt consolidation loans take all of your outstanding balances, pay them off, and allow you to make single payments for all your debts directly to them. This can help lower interest rates. You should look into consolidation loans if your costs become too much to handle monthly or your income drastically changes.
3. Renew loan terms based on income
Changing the original terms of your loan can be beneficial if your income varies a lot, which it is likely to do within the period. For example, if you start to bring in more revenue, you could increase your monthly payments, shorten your term, and see fewer interest charges.
On the flip side, if you suddenly have a dip in income and can’t keep up with your payments, changing what you owe monthly can keep you from falling behind.
4. Start saving early
The more money you have to begin college, the less you’ll have to get a loan. In the end, that means less money squandered on interest charges. Therefore, it’s beneficial to begin saving as soon as possible to lessen the need for government aid later on!