Student loans are an integral part of paying for college, but it’s important to know everything about these financial resources before you make any decisions about them.
There are different types of federal student loans, which carry different terms and interest rates, so be sure to choose the one that will work best for your individual situation.
If you have more questions, check out our comprehensive guide on everything you need to know about federal student loans!
Who can take out a federal student loan?
Students can borrow money in a federal student loan program as long as they have demonstrated financial need and are enrolled at least half-time in an eligible program. Plus, they must be U.S. citizens or eligible noncitizens with a valid Social Security number, or permanent residents with a valid alien registration card.
When can I borrow?
If you’re not in school already, it can be confusing to figure out when and if you can take out a federal student loan. According to FAFSA, you’re eligible for federal loans at least one year before you plan on enrolling full-time in college, or six months after high school graduation. The earlier you apply, however, the better—more money is available each year as demand increases over time.
How much can I borrow?
In order to receive federal student loans, you need to fill out a FAFSA. If you’re in college and want to borrow money for school, here’s how much aid you can receive: $5,500 per year if you are a dependent student ($3,500 per year if your parents already have PLUS loans); $9,500 per year if you are an independent student; $12,500 per year if your parents do not qualify for PLUS loans.
What’s the difference between subsidized and unsubsidized loans?
Subsidized loans are awarded on a need-based formula and don’t accrue interest while you’re in school. This means that if you qualify for one, your interest will be paid for by someone else. The government is that someone. Unsubsidized loans, on the other hand, are not based on financial need and must be repaid even while you’re still in school. These loans have lower interest rates than subsidized ones but also require students to pay interest from day one. For most students, unsubsidized loans tend to carry higher balances than subsidized ones as well as higher rates of default after graduation.
What happens if I don’t pay back my loans?
If you don’t make your student loan payments, there are consequences. The U.S. Department of Education will put a hold on your account and may garnish up to 15 percent of your disposable income through wage withholding if you have a Direct Loan. If you have an FFEL program loan, it can seize your tax refund or force seizure of government benefits or other government payments until repayment is complete.
Can I get rid of the loans early?
One of most often asked questions is whether you can get rid of your student loans early. The answer depends on your financial circumstances and career path. If you’re not able to pay off a portion of your loans each month, it might be worth looking into loan forgiveness programs and other options that can help make repayment more manageable.
What are grace periods?
Grace periods are offered by schools in some cases, and they allow you not to make loan payments while you’re still in school. Some of these grace periods extend after graduation as well, so it’s important to know how long you can take before having to begin repayment. For example, some federal student loans come with a six-month grace period following your graduation date.
Who do I contact if I have questions about my loans?
The best place to start is your school’s financial aid office. They can also tell you how much money you need for your education and what kind of loans or other forms of assistance are available.