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Applying for a Student Loan in the US

Receiving a college education may be the single most important accomplishment that one may achieve in their entire life time.

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Are you confused about how to apply for a student loan? Here is a short explanation that will hopefully demystify what looks like a snarl of red tape at first. Student loans are not grants, as they do have to be paid back, but they can definitely help you focus on your studies and not on worrying about money!

The U.S. government is benevolent enough to make student loans accessible to anyone who wants to attend an accredited learning institution in the United States. These loans are called Direct Loans. The Direct Loan Program is one of the many Federal Student Aid (FSA) programs provided by the Department of Education. The FSA program provides students with a way to borrow money to pay for education after high school (but keep in mind you still have to pay it back!

Luckily students in the United States do not have to borrow from banks. These Direct Loans are created with federal capital and owned by the federal government. The federal government raises the loan funds through Treasury bill auctions that it regularly conducts.

Since you are borrowing this money directly through the federal government, you will have will have to make all of your loan payments to the Department of Education. An important distinction between Direct student loans and ordinary loans is that you don’t have to pay the bank back the student loan. You pay the government back, which is a little more lenient with the interest back instead.

Furthermore, the actual application process is a lot easier than borrowing from a bank. Those who want to apply for Direct Student Loans only need to complete one fairly straightforward application. This is called the Free Application for Federal Student Aid (FAFSA) This one loan application considers you for all Department student financial aid programs, including Direct Loans. Unlike some government loan programs in some countries, you do not have to submit a separate loan application to a bank.

The Direct Student Loan program also has flexible repayment options. There are four repayment plans in the Direct Loan Program: Standard, Extended, Graduated, and Income Contingent. Students can change options when they need to without a fee at any time during the life of the loan.

Make sure that you ask questions of school counselors and finance officers to find out what they are offering in terms of Direct Loans. Almost all schools receive free software training and technical assistance to assist them with guiding potential students through the loan process. Make sure you take advantage of this free perk.

The best place to find student loans is in the school’s financial aid office. The employees in these office are trained to present the different loan options are available during any given year. The officer will discuss your educational plans and describe the different loan packages that apply to your educational and employment situation. You should work closely with the college or school’s financial aid offers to help determine which financial package is best for you. That is what they are there for!

If scholarships, grants, and part time work don’t meet your total need, there are several kinds of low interest rate student loans to consider. For instance you might want to consider applying for a Federal Subsidized Stafford Student Loan. Federal Subsidized Stafford Student Loans are long-term, low-interest loans designed to provide students with funds to help pay for their education. Subsidized means the interest on the loan is paid by the government instead of you while you are in school. If you run into employment or money problems during your school year you can also ask for periods of grace and deferment. However keep in mind that you can’t defer these loans forever. Like any credit company the government will also come after you if you don’t repay it in a timely fashion.

You can also apply for the Unsubsidized Federal Stafford Loan. This is a non need-based, long-term low interest loan designed to provide undergraduate and graduate students with additional funds for their education. It can be used to supplement a Subsidized Federal Stafford Loan. Unsubsidized means undergraduate and graduate students are responsible for the interest on a loan while in school and during periods of grace and deferment. However, payment can be postponed until you have graduated.

Trying to make ends meet while you are in school or during the summer with a part time job can be challenged. Federal Student Loans, Stafford Student Loans and Direct student loans were designed exactly to give hard-working students a break so that they don’t burn out during the school year.