Steps to Getting a Federal Student Loan

Are you considering going to college, but have no idea how you'll pay for it? You are not alone. College tuition costs have risen astronomically in the past decade. More people than ever need the help of grants and loans in order to pay for college.

A good way to start is by researching federal student loans. In general, they offer lower interest rates, and are more flexible about repayment options than private student loans. The government's website on Federal Student Loans, http://federalstudentaid.ed.gov/federalaidfirst/index.html, explains the different kinds of federal loans and dollar amounts available, and helps you complete the Free Application for Federal Student Aid, or FAFSA. If you are interested in federal help with college costs, FAFSA is an abbreviation you will become very familiar with.

You may have been told that applying for a private student loan is easier, but federal loans offer lower interest rates and more favorable repayment terms than private loans, which can make a tremendous difference in today's economic climate. In addition, schools use your FAFSA information to see if you qualify for other types of financial aid, whether from the federal government, your state, or even the school itself. The federal aid that your FAFSA information can lead to will include not only loans, but also grants, scholarships, and work-study opportunities.

Before applying, ensure that you are a high school graduate with a valid diploma or GED certificate, and that you do not have outstanding federal student loan obligations. Also, if you've been convicted on drug charges, you are not eligible for federal student aid.

You can fill out your FAFSA application online at http://www.fafsa.ed.gov. Before doing so, however, you need to know what your state's and your school's application deadlines are. There is no deadline for applying for federal student aid, but the earlier in a calendar year that you do, the better. Some school aid is awarded on a first-come, first-served basis, and you don't want to miss out.

To fill out the form, you will need the following:

1. Your Social Security Number

2. Your parents' Social Security Numbers

3. Your driver's license number if you have one

4. Alien registration number if you are not a U.S. citizen

5. Your federal tax returns and household income information

After filling out all the necessary forms, make or save copies of all of them. Don't send in the one and only copy of the forms, because having to start over later could jeopardize your getting the maximum federal help available.

After completing your FAFSA, you will be issued a Student Aid Report, or SAR. It is important that you read through this and correct any mistakes in it as promptly as possible.

Three types of federal student loans are Federal Stafford Loans, Federal Perkins Loans, and federal ParentPLUS loans.

The Federal Stafford Loan is a fixed rate, low interest loan for undergraduates with financial need (as determined by the school) who will be attending accredited schools on at least a half-time basis. Stafford loans are the most common federal college loans.

The Perkins Loan is like the Stafford Loan in many ways, except it requires no fees and has a longer grace period. Perkins Loans carry a 5% interest rate and are for undergraduate and graduate students with exceptional financial need.

The ParentPLUS Loan is a little different. It is a low interest student loan for parents of undergraduates who are considered dependents by the IRS. A ParentPLUS loan can be used to fund the entire cost of a child's education, minus other financial aid. This type of loan features flexible repayment options, postponement of repayment as long as the student is enrolled at least half-time and for an additional six months thereafter. There is no prepayment penalty, and no income or collateral requirements, but a credit check will be made. Interest on ParentPLUS loans may be tax deductible.

Going to college can be the best investment of time and money that you ever make. But it is expensive, so it is important that you compare ways of financing your college education. While private loans may require less paperwork, they generally have higher fees and interest rates than federal student loans. Therefore, it makes sense to explore all your federal loan, grant, and scholarship options before applying for a private loan.

The government has a Federal Student Aid Gateway website at http://www.federalstudentaid.ed.gov/ that has free information and guidance for students filling out FAFSAs. This is a good place to begin exploring your options for federal help with college costs.