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Student Loan Financial Aid
Once you have completed the FAFSA and find out how much federal aid you are eligible for you will also know just how much you will need each year in the form of student loan financial aid. Loans are the largest student financial aid program available in the US. Billions of dollars in loans are given to students each year and comprises over 50% of student financial aid overall. Federal student loan financial aid is quite readily available and is often the borrower’s initiation into the world of credit. Taking out a student loan a as financial aid is a big step and one that should be taken with as well informed as possible. You are responsible for repaying the loan once you have completed your education program or dropped below half time. Not repaying the loan can result in financial ruin.
Programs for Student Loan Aid
There are a number of federal student loan financial aid programs. They are all pretty easy to obtain, even though some are specifically need based. Federal loans do not require any form of credit check and are backed by the government. Private loans usually require good credit so they are often offered to parents of students or students with cosigners.
Stafford – these loans are taken out by the student. They can be subsidized or unsubsidized. On subsidized loans, the government pays the interest for the student during education, grace and deferment periods. They are usually need based loans and are issued on a first come/first serve basis. Unsubsidized loans constantly accrue interest. They both have a six month grace period following the completion of education or when the student drops below half time. The amount that you can borrow depends on your class standing. With each year you complete, you are able to borrow about $1,000 additional dollars for dependent students and $2,000 for independent students. The minimum repayment installment is $50 and there is no penalty for early repayment.
Parent Loans – PLUS loans are offered to parents of students. The parents have to have good credit standing. The amount of the loan depends on the remaining amount needed to finance the student’s education after all other financial aid has been issued. Parents are allowed to borrow for more than one student at a time. There are graduate PLUS loans available as of 2005 with the same conditions as undergraduate PLUS loans. These loans require immediate repayment and have no grace period.
Perkins Loan – these loans are need based and geared to students most in need of financial aid. They are funded by the government and have a very low interest rate. The grace period is nine months after the student drops below half time or completes the degree program. The annual maximum for borrowing is $4,000 for undergraduate students and $6,000 for graduate students.
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