School Loans - Need Based vs Non-Need Based Loans

If you are thinking about applying for a new school loan or consolidating your current school loans now that you have graduated, the information provided in this article should help you determine which loan you will need and the terms and conditions of the various loans.

Generally, student loans are categorized into either need base loans or non-need based loans, and there are federal and private loans available which fit into both of those categories.

Features of Need Based Loans:

1. Lower Interest Rates: The federal government is the main provider of need loans. The Stafford loan is the most popular need based loan which is a fixed interest rate loan of 6.8 percent. The Perkins loan has a rate of 5 percent.

2. Delayed Repayment: Need based federal loans do not require you to repay the principal loan until after you graduate or leave school. This is a deferred payment loan.

3. Interest Subsidization: As interest accrues on the loan, the government will pay this interest while you are in school and for up to 6 months after graduation.

Features of Non-Need Based Loans: Non-Need based loans are for students and their families who cannot afford to pay 100 percent of the college tuition and costs, but do not qualify for need based loans due to their income level. Non-need based loans typically have a higher interest rate, have no in-school interest subsidy and may require immediate repayment of principal.

There are four main types of School Loans that you need to know about;

Perkins Loans are need-based loans and are awarded by the financial aid office to students with the highest need. The interest rate is very low-5 percent-and you don't make any loan payments while in school.

Subsidized Stafford Loans are need-based loans with a fixed interest rate of 6.8 percent. With subsidized loans the federal government pays the yearly interest while you're in school.

Unsubsidized Stafford Loans aren't based on financial need and can be used to help pay the family share of costs. You're responsible for paying interest on the loan while in school. You may choose to capitalize the interest. The advantage of doing this is that no interest payments are required. The disadvantage is that the interest is added to the loan, meaning that you will repay more money to the lender.

Grad PLUS loans are student loans for graduate students sponsored by the federal government that are unrelated to need. Generally, students can borrow up to the total cost of education, minus any aid received. The advantage of this loan is that it allows for greater borrowing capacity. However, students should consider lower-interest loans, such as the Subsidized Stafford or Unsubsidized loans prior to taking out a Grad PLUS loan.

You can read more about federal and private loans that are incorporated into the need and non-need categories at our website listed below.

School Loan Consolidation

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When to consolidate your School Loans!

Lot's of people with school loans aren't quite sure when they should consolidate. These tips will help you decide on the right time for your situation.

There are no deadlines in the Federal Consolidation Loan program. There are several things to keep in mind, however, regarding when to do a school loan consolidation. Your loans must be fully disbursed to be eligible for a Federal Consolidation Loan. They also must be in their grace period or in repayment.

It is best for you to consolidate while your Federal Stafford Loans are still in their grace period, when they still have the lower in-school interest rate.

If you are consolidating your federal student loans during your grace period but are worried about losing your grace period, section D on the Federal Consolidation Loan application includes a question that allows you to enter your grace period end date. If a date is provided in this question, the lender won’t complete processing of the application or fund the loan until near that date. So you can apply for the consolidation loan at any time during your Federal Stafford Loan grace period, qualify for the lower in-school interest rate, and postpone the start of repayment on the debt until near the end of your grace period.

The longer you postpone funding of your Federal Consolidation Loan, however, the more interest will accrue on any unsubsidized Federal Stafford Loans (or any other federal student loans for which you are responsible for the interest) that are included in your Federal Consolidation Loan. You should also know that, while funding of your Federal Consolidation Loan is pending, interest may accrue on your Federal Stafford Loans at a different rate than the rate used to calculate your Federal Consolidation Loan interest rate.

If your loans are already in repayment, federal student loan consolidation may still be beneficial. It allows you to fix the interest rate on your federal student loans while rates are still low.

For more information...visit our website at Student Loan Debt Consolidation

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Applying for a School Loan? What you need to know about FAFSA

If you're a prospective college student and you are in need of a school loan, a Federal student loan is a good option. In order to get approved for federal financial aid you will need to complete the FAFSA. FAFSA is the acronym for “Free Application for Federal Student Aid.” Applying for Financial Aid is free and you can apply online a www.fafsa.ed.gov . Complete and submit a Free Application for Federal Student Aid which is the basis for all financial aid. Students can begin submitting their FAFSA on January 1. Here are some frequently asked questions regarding FAFSA and federal financial aid.

How do I apply for financial aid?
A FAFSA is all you need to get started.

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What is FAFSA?
Free Application for Federal Student Aid. It’s FREE!!

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Do I have to fill out a FAFSA every year?
Yes. Applications are available starting January 1^st, both paper and electronic applications.

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What is the difference between submitting an electronic FAFSA versus a paper FAFSA?
An electronic FAFSA is processed in two (2) to three (3) weeks, while the paper FAFSA takes four (4) to six (6) weeks to process.

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What is the deadline for filing the FAFSA (i.e. applying for financial aid)?

The PRIORITY deadline for FAFSA is March 2^nd. Forms must be postmarked no later than March 2^nd before the academic year for which aid is being sought in order to be considered for STATE aid. However, if the March 2^nd deadline is missed, you will still be considered for federal Financial Aid, as well as other Financial Aid programs.

You can apply for a Financial Aid through the last day of classes in Spring semester.

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How is the FAFSA used to determine my financial aid need?
The federal government uses data provided on the FAFSA to calculate a student’s Expected Family Contribution (EFC). The Financial Aid Office calculates a student’s Cost of Attendance (COA) which includes tuition, living expenses, miscellaneous fees, books, etc. COA minus EFC equals a student’s financial need, which we then try to meet with federal grants, state grants, academic or talent scholarships, institutional grants, federal work study, and various loans.

Some of the above information can be found at http://financialaid.fullcoll.edu/Frequently%20Asked%20Questions.htm
Get more information @ School Loan Consolidation