Any student that wishes to take advantage of government financial aid needs to fill out the Free Application For Student Aid, or the FAFSA. This form can be completed online through a secure website that is maintained by the Department of Education.
Students will need to have their tax return, bank statements and a list of their investments handy. Many students who are still living at home will also need to provide financial information related to their parents as well.
The application process is relatively straight forward and easy to follow. The information will be used to determine how much aid a student will qualify to receive during the upcoming school year. Once the application has been processed, the school’s financial aid department will package an award that often includes grants, scholarships as well as student loan options.
There are two important things to keep in mind as the financial aid process unfolds. First, it takes some schools a couple of months to package an award and make it available to students. Second, there are annual limits to how much money students can get from the government. This amount is based on the school’s annual cost of attendance in addition to a student’s grade level.
Stafford loans are provided by the government and they do not require a credit check or a co-signer. The government sets the interest rate, and they will pay for a portion of the interest that accrues while a student is in school.
Private loans are offered by numerous banks and lenders and they do require a credit check in most cases. Some banks will also give loans to students based on the income and credit rating of their parents. Many lenders will require a co-signer or collateral such as property to secure a loan. One benefit of choosing a private loan is they are not bound by the annual limits the government imposes for the Stafford program.
Students are responsible for paying back their loans, and most will enter into repayment six months after leaving school. There are many options that are available to help students who are struggling to pay, and the government also offers various forgiveness programs for students who qualify.
Student loans are very difficult to discharge in bankruptcy, and those who fall behind on their payments risk going into default. Wage garnishment, the seizure of tax refunds, liens and other forms of collection are all possible consequences for those who do not make their payments.
Borrowing for school is almost a necessity and students need to consider their options carefully. Working with the school’s financial aid staff can help to address any questions or concerns about how to secure to necessary funding for college.