research about student loans

Financial Aid Basics

As I undergone a lot of research about student loans, one of the most useful information that students should know today is about how to get financial support in college. As I learned, many are not aware about this. Some are aware but are not familiar with how the process goes. This pushes to have this to give some clear options and ways. Here is the information I get from a great site.

STEP 1: Free Application for Federal Student Aid (FAFSA)

The primary form necessary to qualify for federal student aid is the Free Application for Federal Student Aid (FAFSA). Pell and FSEOG Grants, Perkins Loans, Stafford Loans, PLUS Loans (at many schools), and Federal Work-Study all require a FAFSA filing for eligibility. The FAFSA examines a family's financial situation and qualifies students for aid based on U.S. Department of Education guidelines.

The FAFSA is completed at the end of each calendar year for the coming academic year (generally from the late summer of one year to the late spring of the next). It may not be submitted until January 1 of the new academic year. For example, for the 2003-04 school year, a FAFSA may not be submitted until January 1, 2003. It is always recommended that a family file the FAFSA as quickly as possible.


Following the submission of the FAFSA, the government will submit a Student Aid Report (SAR) detailing the financial aid for which the family is eligible. The SAR usually arrives four to eight weeks after the government receives the FAFSA. Copies of it can be sent to the school(s) to which the student has applied to be admitted (request this when filing the FAFSA). If your SAR fails to arrive within four weeks, or if you need another copy, contact Federal Student Aid Programs at 319-337-5665.

STEP 2: Search for Scholarships

While awaiting results, a student can look for scholarships (often called Fellowships For Graduate Study). The search can begin as early as a family wishes, but awards begin to be finalized in the spring preceding the start of the academic year. You can search for scholarships on NextSTUDENT.com.

STEP 3: Investigating Loans

While it is the hope of every family to be able to cover the entire cost of education with grants and scholarships ("free money"), the unfortunate reality is that most families will have to borrow or use their assets to fund higher education. The rule of thumb for families is grab all the "free money" available, and then borrow wisely. The three federal loan programs are often a great way to borrow wisely. Although there are alternatives, these programs offer the best terms and easiest qualification for most families.

Perkins Loan

The Perkins Loan is the most affordable federal loan since it has the lowest interest rate (5%) and fees. However, the Perkins Loan is only available to families based on need; so if the government doesn't offer it on the SAR, you can't get it. It also has a $4,000 limit and is borrowed in the student's name without respect to credit worthiness.

Stafford Loan

The Stafford Loan is also borrowed in the student's name. A dependent undergraduate student can borrow $2,625 for the first year; as a sophomore $3,500; and as a junior or senior $5,500. Independent undergraduate students receive additional eligibility for $4,000 for the first two years and $5,000 for the last two. The interest rate is variable yearly and capped at 8.25% -- lower than the PLUS Loan (below) but higher than the Perkins Loan. Some of the interest may be subsidized by the Federal Government for those who qualify. As with the Perkins Loan, credit worthiness is not an issue.

Plus Loan

The Parent Loan for Undergraduate Students (PLUS) is a loan for parents of dependent undergraduate students. It has a slightly higher interest rate than the Stafford Loan, but is only limited in amount by the cost of education not already covered by other forms of aid. For instance, if the cost of education at a school is $25,000, and the student has already received $5,000 in other aid, then the parent of the student may borrow the remaining $20,000 necessary to cover the cost of schooling. The parent that borrows the money must only meet federal minimum standards for credit worthiness to qualify.

STEP 4: The Award Letter

In the springtime, the school(s) to which the student has been accepted will issue their Award Letter(s). The Award Letter lists all the aid the student is eligible for and what the Expected Family Contribution (EFC) is to be.

STEP 5: Applying for Loans

The final step in the financial aid process is to apply for the loans for which the family is eligible. Schools often send preprinted Perkins and Stafford Loan applications to the student in the award-letter package, but ask the student to select a lender from a provided list. The student may either choose one of the listed lenders or apply for private loans. PLUS-Loan eligibility is normally not listed. When this is the case, a parent must contact a lender to receive an application.

reference: http://www.youngmoney.com/financial_aid/faq/020809_04