Let’s say your hopes have been dashed many times by applying for different scholarship schemes, all to no avail. Or you are financially incapacitated to train yourself through high school, college, or University.
This post is for you if you’re in either of these categories. You could still achieve your academic dream by simply learning how to secure a federal student loan and why you should choose that over a private student loan.
As you read, you will discover what a federal student loan is, how to secure a student loan from the federal government, eligibility requirements to prevent the decline of an application for a Federal Student Loan, how many student loans you can get, and lots more.
Many have completed their studies through the Federal Student Loan program, and you, too, can. All you need is to be equipped with the right information. Trust me, there’s nothing good advice can’t fix.
So, let’s journey through this post to discover How to Secure a Federal Student Loan!
Also Read: All you need to know About Student Loan Repayment Plan
Table of Contents
What is a Federal Student Loan?
The Federal Student Loan is money borrowed from students by the federal government specifically for their academic needs. Also known as a government loan, the Federal Student Loan allows students and their parents/guardians to borrow money for college directly from the Federal Government. Unlike a private student loan, the Federal government is in charge.
The issuance of this Loan depends on your needs, year of study, and credit history.
You should know that many federal student loans offer interest deferment programs. This means that the government covers the loan interest while the student is still studying. Students are not required to begin repaying their loans until they have graduated.
You must be excited. This is what you need to be a graduate, finally. Before you venture into the application process, you need to know which Federal Student Loan program you’re applying for.
Also Read: The Different Types of Loans for Students
Which Federal Student Loan is the Best?
There are three types of federal student loans. This section aims to educate you on each of them so that you can choose the best one for you. The types of Federal Student Loan include;
Direct Subsidized Loans
Direct Unsubsidized Loans
Direct PLUS Loans are divided into two; Grad PLUS Loans and Parent PLUS Loans.
- Direct Subsidized Loans are for students with demonstrated financial need, as determined by federal regulations. As the name implies, the interest rate is subsidized. There is no interest charged while an undergraduate student is in school at least half-time, during deferment (a period when loan payments are temporarily postponed), or during grace (the period, usually six months after you graduate or leave school before you begin to make principal and interest payments).
- Direct Unsubsidized Loans are federal student loans that aren’t based on financial need. Your school determines the amount you can borrow based on the cost of attendance and other financial aid you receive. Interest is charged during all periods and will be capitalized (when unpaid interest is added to a student loan’s principal amount), even when you’re in school, during grace and deferment periods. This increases your total federal loan cost.
- Direct PLUS Loans are unsubsidized credit-based federal loans for parents of dependent and graduate/professional students. PLUS, loans can help pay for education expenses up to the cost of attendance (the amount of money your school estimates you’ll need to attend there one year), after your other financial aid is exhausted. Interest is charged during all periods and will be capitalized. This increases your total federal loan cost.
This should help you apply strategically and get a loan to see you through school. So let’s get to how you can secure this loan.
Also Check: How to Change Student Loan Repayment Plan
How do I Secure a Federal Student Loan?
1. Fill out the Free Application for Federal Student Aid (FAFSA®).
The information you provide on the FAFSA® application will determine your financial aid eligibility. Your financial information is plugged into a formula that calculates your expected family contribution, which is the amount you are expected to contribute towards the cost of your education. Your school will subtract that number from their cost of attendance to determine your financial need.
Note: Only US citizens and eligible non-citizens are considered eligible to receive federal financial aid through the FAFSA®.
You can file your FAFSA® as early as October 1 for the following academic year. For example, the 2022 FAFSA® opened on October 1, 2020. Financial aid is awarded on a first-come, first-served basis, so the sooner you get your application in, the better.
2. Follow through to find Out Your Loan Eligibility.
After you file, you will receive your student aid report in the mail. This will contain confirmation of all the information you supplied on your FAFSA®. Check to ensure all the information on your application is accurate, and make any necessary corrections.
You can expect to receive financial aid offers from the schools listed on your FAFSA® in the springtime. Those offers will contain information about any loans, grants, and scholarships you are being offered.
See Also: How to Secure Private Student Loans
3. Sign Your Agreement: Master Promissory Note (MPN)
When the loan is approved, You need to sign a master promissory note to receive your loan. In it, you must state your intention to pay back the loan after leaving school. The MPN is a legally binding document. Signing your MPN should not take more than 30-minutes and can be done online
Why will you be denied a Federal Student Loan?
Many students think of federal aid such as Stafford loans as a “sure thing.” All you have to do is fill out the FAFSA and get your money. Well, chances are that you will be denied a Federal Loan if;
- You’re not a citizen or an eligible non-citizen.
- You don’t have a high school diploma or a GED. Alternatively, you must have successfully completed homeschooling.
- If you are not registered for Selective Service, if you’re a civilian male.
Aside from not meeting one of these basic eligibility requirements, a few other things could get your federal aid denied. To avert that, you need to get the correct documents ready. Keep reading!!!
Find Out About: Benefits of Student Loans – 10 things you need to know
What Documents do I need to Apply for a Federal Student Loan?
Here’s what you need to complete your application for a Student Loan from the Federal Government;
- 728 x 90 – Confused About FAFSA – Blue
- Your personal information (Name, date of birth, contact information, and social security number)
- Tax and income information from two years before the academic year you are applying for aid.
- Records of nontaxable income such as welfare, child support, or veteran’s benefits from two years before the academic year you are applying for aid.
- Records of taxable fellowships, grants, scholarship aid, combat pay, work-study pay, and other types of finances
- Recent bank statements
- Records of stocks, bonds, and other investments
- The Title IV Institution Codes for any schools you’re applying to
Note: If you are determined to be a dependent student, you will need your parent(s) to supply the above information.
- Free Online Courses at Yale University
- Free Online Courses with Certificate of Completion
- Free online Courses for Developing Countries
- Free Online Courses from Harvard University
- Short Courses in Nigeria
- 10 Best Online Photography Courses
Get access to over 1000 free online courses
How much can I Borrow from the Federal Government?
The maximum you can borrow depends on your year in school, your status as a dependent or independent student, and the type of loan. Depending on the type of federal student loan you are applying for, subsidized loans are for undergraduates only, while unsubsidized loans are available to undergraduates and graduate students.
There are both annual and aggregate loan limits for these loans. The aggregate limit is the total federal student loan debt you can take on throughout your undergraduate and graduate-level studies. If you reach your total limit, you can take out additional federal student loans if you first pay down your outstanding debt.
Undergraduate Students have a limit of $58,000, whereas the total limit for professionals is $138,000
How long does it take to Secure a Federal Student Loan?
It takes around 1–3 weeks to process a federal student loan, unlike a private student loan. In most cases, you can expect federal student loan funds to be disbursed within 10 days before the 1st day that classes begin.
If you are a first-year student and a first-time borrower, there may be a 30-day delay in allocating the funds. In this case, the funds may be disbursed 30 days after the 1st day of the payment period.
How do I Repay the Loan?
Federal loan borrowers are considered to default once they go 270 days without making a payment.
As mentioned earlier, federal student loans come with certain borrower protections, including the ability to pause payments temporarily without the risk of wage garnishment or other such repercussions.
Federal loan borrowers can get this relief via deferment or forbearance. With deferment, borrowers avoid accruing interest during the period in which payments aren’t made. With forbearance, borrowers are still responsible for paying interest on their loans.
Furthermore, it’s possible to defer student loans for up to three years. On the other hand, forbearance is only offered for up to 12 months. As of the first quarter of 2019, there were an estimated 3.4 million federal student loans in deferment and another 2.7 million in forbearance.
What are the benefits of a Federal Student Loan?
- You have flexibility. The borrower can change their repayment options after the loan has been disbursed (sent to your school).
- You can make payments based on your salary.
- You don’t need a strong credit history to get federal student loans. Unlike private student loans, most federal student loans don’t require the borrower to have a strong credit history. This can be especially helpful for recent high school graduates who plan on attending college but haven’t had enough time to build up their own credit.
- You don’t need a cosigner.
Which is best: Private Student Loan or a Federal Student Loan?
Unlike private Student Loan, federal student loans are less expensive, more available, and have better repayment terms. Federal student loans have fixed interest rates that will not increase over the life of the loan, unlike variable interest rates, which can change.
Perkins Loans and Direct Subsidized and Unsubsidized Loans do not depend on the borrower’s credit history and do not require cosigners.
Federal student loans offer generous deferment and forbearance options, flexible repayment plans like extended repayment, graduated repayment, income-driven repayment, and opportunities for loan forgiveness programs like public service loan forgiveness.
And you can’t find any of these in a Private Student Loan.
Securing a federal student loan is possible and better than a private student loan. I believe this article will help you secure a federal student loan without stress. We hope to hear from you once you secure a federal Student Loan following the strategies listed in this article.