google-site-verification=39nfoImE9pSvzeOBInOzYWgIleJ9YB9Ck2ijqVwW6UA Student Loans: Federal vs. Private


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Student Loans: Federal vs. Private

March 3, 2018


Student Loans - Everyone has their own opinion on this and it's great to hear everyone's opinion because they can all be so different.  I believe if you are in a position where you are looking at student loans, it should start with your family (personal) philosophy on the importance of the college aged years.  How important are these years in the growth of a person.  In many cases a loan is unavoidable if you want to go to college, with even a semester of community colleges costing thousands of dollars these days, college affordability often makes a big difference in where students are able to go to college. Luckily, you can usually bring those costs down with federal aid and scholarships but when you need to fill in the gaps, as long as they are reasonable gaps, there are several student loan options out there to help you pay college bills.


Here’s an explanation of the types of student loans you might encounter once you get started.  I know there are parents of juniors, sophomores and freshman out there that are saying "I don't need to read any further, I'm not going to go the student loan route, if he doesn't get enough of a scholarship, he is not going to that college."  Well that mentality is counter productive to the process.  Learn about everything you possibly can, understand all that you can about the process and never think that anything is impossible or won't happen until you are actually there, because you never really know until you go through it.  Also, in the event you do not need to a loan to pay for college, maybe it is a great time to have him take out a loan, build credit and learn about the responsibility of paying the bill, (because it will be his).  So please humor me and keep reading!


There are four major types of federal student loans. Then there are private loans. And if you’re thinking about borrowing money for college, you need to know about all of them. Please understand that a federal student loan and a private student loan are completely different so be sure to do your homework and understand what you are getting into.


Federal loans

First things first: to qualify for any federal student loan aid, you must fill out the Free Application for Federal Student Aid (FAFSA) every year. The FAFSA gives the government an understanding of you and your family’s income, expenses, and projected college costs. It then uses that information to determine how much federal aid you’ll qualify for. The FAFSA is free, but you have to meet deadlines. You should submit your completed FAFSA ASAP after October 1 each year using the previous year’s tax returns.


Using information from the FAFSA, the US government issues different types of federal loans. You can't request one loan over another, but you'll find out what you're eligible for on the financial aid award letter that comes from colleges that accept you. Also keep in mind that there is a maximum on how much you can borrow in federal loans each year.


Here’s a look at the main types of federal student loans available to college students.  I'll keep it brief but as always if you have questions - just ask me!


Direct Subsidized Loans

These loans are for students with demonstrated financial need. They accrue interest at a fairly low rate.  Subsidized means that the government—not you, the student—pays all the interest that accrues during the time you're in school. That can save you a lot of money in the long run.


Direct Un-subsidized Loans

Un-subsidized loans aren’t based solely on financial need. They’re useful if you just don't have quite enough money on hand to pay for school but don't qualify for financial need by government guidelines.