Getting started with federal student loans? You likely have a bunch of questions. So we’ve gathered some of the most common questions people have about these loans and answered them for you!
What are federal student loans and how do they work?
Federal student loans are loans that are offered by the government to students to cover the cost of a student’s college education. When you apply for a federal student loan, you are, in effect, borrowing the money from the federal government. You will have to repay the amount that you borrow with interest—unless you qualify for student loan forgiveness.
How can I get federal student loans?
Filing the Free Application for Federal Student Aid or FAFSA is the mandatory first step to applying for federal student loans, including Direct Subsidized, Unsubsidized Loans, or Parent PLUS Loans.
How long does the loan application process take?
It can take several months after you submit the FAFSA for the college financial aid office to send you details of your financial aid package. After you receive these details, you will have a few weeks to decide whether to accept the entire financial aid package or only part of it, depending on whether your financial status has changed from the time you submitted the FAFSA.
Is filing the FAFSA a one-time thing?
No, you need to file the FAFSA every year that you are enrolled in college. This is because your financial aid eligibility may differ from one year to another depending on your family’s financial situation. If you fail to file the FAFSA, you will not be eligible to apply for loans or grants for that year. Instead, you will have to find a way to fund your education through other sources.
When should I submit the FAFSA?
FAFSA applications are open to students from October 1st of the pre-award year. The deadline for submitting the completed FAFSA is June 30th of the award year. However, some state and college FAFSA deadlines may be earlier than June 30th. Considering most schools award aid on a first-come, first-serve basis, it is advisable to submit your FAFSA as early in the cycle as possible.
Should I submit the FAFSA early even if I know that my family’s finances are likely to change in the near future?
When you fill the FAFSA, you have to provide details of your family’s financial situation as of the date of submission. You cannot give projected details. If your family’s finances change, you can edit your FAFSA details online. These changes process within 3 to 5 days. The schools on your list can then access the revised details 1 day after your edited FAFSA is processed.
Are there any restrictions on what I can use federal student loans for?
Federal student loans can be used to pay for all education-related expenses that are included in the college’s published cost of attendance or COA. Generally, this includes tuition, fees, textbooks, housing, food, transportation, and other college costs.
Which is a better option: subsidized or unsubsidized federal student loans?
Subsidized loans are a popular option in that they cost less than unsubsidized loans. This is because the federal government pays the interest on subsidized loans while you are in college, during the grace period, and during periods of authorized deferment. This means you do not have to pay the accrued interest during these periods.
When do I have to start repaying my federal student loans?
Typically, you will have to start repaying your federal student loans within 6 months of graduating or within 6 months of dropping below half-time enrollment—this is called a grace period.
What is the time period within which I have to repay my entire loan?
The standard repayment term on a federal student loan is 10 years. The projected interest for 10 years plus your principle equals your total loan amount. Your total divides evenly into 120 installments to calculate your monthly payments.
However, there are multiple types of repayment plans: Graduated, Extended, Income-Based, to name a few.
What if I cannot afford to make my monthly payments?
Federal student loans offer you a lot of flexibility in terms of repayment. If you are struggling to make your monthly payments, you can explore other options such as Income-Based, Graduated or Extended Repayment Plans.
How can I find out how much I owe?
The fastest way to find out how much you owe is by checking directly with your student loan servicer. Alternatively, you can get this information as well as all other details regarding your federal loans from the National Student Loan Data System (NSLDS).
Can anyone access the NSLDS and find out my federal loan balance?
No, you will need to log in with your FSA ID to be able to access this information. An FSA ID serves as your legal signature. You can create a new FSA ID on the Federal Student Aid website.
What if my student loan servicer has changed?
When you log into the NSLDS using your FSA ID, you will be able to get the contact details for your new loan servicer.
What are the advantages of federal student loans v/s private student loans?
Federal student loans offer several benefits over private student loans. They have a lower, fixed rate of interest for the life of the loan. They also offer alternate repayment options if you find yourself struggling to make your monthly payments under the standard repayment plan. If you meet certain requirements, you may also be eligible for loan forgiveness.
What is entrance counseling and is it mandatory?
Entrance counseling is mandatory for first-time federal borrowers and must be completed at the time of taking the loan. You will only be able to access your funds after you have completed this step. Entrance counseling helps you understand the loan process and how to manage your finances. It also helps you plan your repayment schedule to minimize the risk of defaulting on your student loan.
What is exit counseling and is it mandatory?
Exit counseling is mandatory for all federal borrowers and must be completed after graduation or if you drop out of school. Exit counseling helps you understand your repayment obligations and your alternative options if you cannot meet your monthly financial commitments.
Should I pay off my loans early if I can afford to or will I be penalized for early payments?
There are no penalties for prepaying federal student loans. It is to your advantage to make early payments on your student loans and even pay them off in full if you can. Early payments help you save a substantial amount of interest.