Student Loan - help!!?
Asked by beckyvincenzesIve currently taken a semester off of college, and because of that my parents are not going to pay for my school anymore. I'm living at home now - working full time, paying health insurance, rent (my lease isnt up yet @ school) and my car payment. When i go back to school I will still have all of these expenses, plus 12 credit hours - and i really want to start back in the summer. How do I go about getting a student loan? Which banks have the lowest interest rates? Are all student loans the type that you don't pay back until you finish school? And Can i use these loans to help pay for my rent and such? Final question - lol - can someone help me figure this out before my May semester starts?!
Favorite Answer
Answered by FinAidGrrl
To apply for a federal financial aid, including federal student loans, begin by filing the Free Application for Federal Student Aid (FAFSA). This form is your application for all federal aid and your school may also use it to determine your eligibility for other types of aid. After you file this form and have the results sent to your school, they will contact you to inform you of your financial aid eligibility. Typically, they will send a letter listing all of the various types of aid you are eligible for. Follow the instructions on this letter to accept or decline your awards. Each school processes its federal loans a little differently. About 1/4 of schools use a process called Direct Lending where the money that students receive goes straight from the federal government to the school. There are no private banks involved in this process and the rate you get will be the rate you get. The rest of the schools use a process called FFELP wherein the money comes from private banks acting on behalf of the government. The money you get is still federally-funded; it's simply chanelled through a private bank. This allows schools and students some flexibility in the processing of their loans and will afford you the opportunity to choose your own lender. Now, there are dozens of student loan lenders out there so it can be hard for a student to discern which lenders are trustworthy. I would recommend contacting your school to see who they work with the most and talking to other students to see what lenders they have had success with. When you select a student loan lender, you're going to want to pay attention to the interest rates offered. Many people will make a big deal about this because, well, interest rates ARE a big deal. However, its important to understand that all lenders are starting with the same rate. The Stafford Loan interest rate for EVERYONE right now is 6.8%. The only way this rate will be lower is if a bank uses their own resources to offer you additional benefits. Examples of these benefits include * a fixed percentage off of your interest rate after a certain number of on-time payments * a fixed percentage off your rate when you enter repayment * a fixed percentage off your rate when you sign up to have your payments automatically deducted from a bank account * a certain dollar amount back (a decrease in the overall amount you owe) after a certain number of on-time payments And so on... Frankly, a lot of students don't take advantage of these benefits -- they either miss a payment, never sign up for their automatic deduction, or they consolidate their loans and lose the benefits. For this reason, I always recommend researching the lenders' other strengths and weaknesses, too. Ask your self: "If everyone's rates were the same, who would I choose?" Look for a lender that has proven itself trustworthy, has been in the business a while, has good customer service, and is technologically advanced. You'll probably be better off with a lender who doesn't sell their loans to other people (many smaller lenders tend to thrive on this practice). Of the dozens of lenders out there, I like Sallie Mae, Citibank, Bank of America, Citizens Bank, College Board, and EdAmerica. You can get a larger list of lenders here: www.finaid.org/loans/biglenders.phtml All *federal* student loans and most private student loans do not need to be repaid while you are in school. Most of these loans will also offer a post-graduation/withdrawal "grace period" during which you do not repay your loans. For Stafford loans and many private loans, this grace period is 6 months; for Perkins loans, the grace period is 9 months. Grace periods begin when a student (a) graduates, (b) withdraws, becomes "inactive," or otherwise leaves the school or (c) drops below half-time enrollment [6 credits for an undergrad]. Always take the federal loans first. If you must borrow a private loan, check the lender's website to see if they offer "deferment" while you are in school, if they offer a grace period, and what their benefits are. Pay close attention to their interest rates (and how often the rates change). If you can get a decent fixed-rate loan, take it! Those are hard to come by. Apply with a co-signer if you can -- it will help your interest rate and, with some lenders, you can get the co-signer "released' (i.e. let off the hook) after 2-4 years of on-time payments. As for using the loans to pay for rent.... Your financial aid package (loans and all) can be used to cover your "Cost of Attendance" (COA). A COA is a lot like a budget that your school establishes for you (you don't get to create your own COA) that includes the costs of normal education-related expenses like tuition, fees, books, transportation, etc. Almost all schools will include an "allowance" for housing in your COA. This allowance will be modest -- usually the equivalent of the cost of a dorm room. Now, all of your financial aid will be disbursed to your student account. The money will first be applied to your billable charges like tuition and fees. Any excess money will be returned to you in the form of a refund check. You can then use this check to pay for your rent.
To apply for a federal financial aid, including federal student loans, begin by filing the Free Application for Federal Student Aid (FAFSA). This form is your application for all federal aid and your school may also use it to determine your eligibility for other types of aid. After you file this form and have the results sent to your school, they will contact you to inform you of your financial aid eligibility. Typically, they will send a letter listing all of the various types of aid you are eligible for. Follow the instructions on this letter to accept or decline your awards. Each school processes its federal loans a little differently. About 1/4 of schools use a process called Direct Lending where the money that students receive goes straight from the federal government to the school. There are no private banks involved in this process and the rate you get will be the rate you get. The rest of the schools use a process called FFELP wherein the money comes from private banks acting on behalf of the government. The money you get is still federally-funded; it's simply chanelled through a private bank. This allows schools and students some flexibility in the processing of their loans and will afford you the opportunity to choose your own lender. Now, there are dozens of student loan lenders out there so it can be hard for a student to discern which lenders are trustworthy. I would recommend contacting your school to see who they work with the most and talking to other students to see what lenders they have had success with. When you select a student loan lender, you're going to want to pay attention to the interest rates offered. Many people will make a big deal about this because, well, interest rates ARE a big deal. However, its important to understand that all lenders are starting with the same rate. The Stafford Loan interest rate for EVERYONE right now is 6.8%. The only way this rate will be lower is if a bank uses their own resources to offer you additional benefits. Examples of these benefits include * a fixed percentage off of your interest rate after a certain number of on-time payments * a fixed percentage off your rate when you enter repayment * a fixed percentage off your rate when you sign up to have your payments automatically deducted from a bank account * a certain dollar amount back (a decrease in the overall amount you owe) after a certain number of on-time payments And so on... Frankly, a lot of students don't take advantage of these benefits -- they either miss a payment, never sign up for their automatic deduction, or they consolidate their loans and lose the benefits. For this reason, I always recommend researching the lenders' other strengths and weaknesses, too. Ask your self: "If everyone's rates were the same, who would I choose?" Look for a lender that has proven itself trustworthy, has been in the business a while, has good customer service, and is technologically advanced. You'll probably be better off with a lender who doesn't sell their loans to other people (many smaller lenders tend to thrive on this practice). Of the dozens of lenders out there, I like Sallie Mae, Citibank, Bank of America, Citizens Bank, College Board, and EdAmerica. You can get a larger list of lenders here: www.finaid.org/loans/biglenders.phtml All *federal* student loans and most private student loans do not need to be repaid while you are in school. Most of these loans will also offer a post-graduation/withdrawal "grace period" during which you do not repay your loans. For Stafford loans and many private loans, this grace period is 6 months; for Perkins loans, the grace period is 9 months. Grace periods begin when a student (a) graduates, (b) withdraws, becomes "inactive," or otherwise leaves the school or (c) drops below half-time enrollment [6 credits for an undergrad]. Always take the federal loans first. If you must borrow a private loan, check the lender's website to see if they offer "deferment" while you are in school, if they offer a grace period, and what their benefits are. Pay close attention to their interest rates (and how often the rates change). If you can get a decent fixed-rate loan, take it! Those are hard to come by. Apply with a co-signer if you can -- it will help your interest rate and, with some lenders, you can get the co-signer "released' (i.e. let off the hook) after 2-4 years of on-time payments. As for using the loans to pay for rent.... Your financial aid package (loans and all) can be used to cover your "Cost of Attendance" (COA). A COA is a lot like a budget that your school establishes for you (you don't get to create your own COA) that includes the costs of normal education-related expenses like tuition, fees, books, transportation, etc. Almost all schools will include an "allowance" for housing in your COA. This allowance will be modest -- usually the equivalent of the cost of a dorm room. Now, all of your financial aid will be disbursed to your student account. The money will first be applied to your billable charges like tuition and fees. Any excess money will be returned to you in the form of a refund check. You can then use this check to pay for your rent.
