The Free Application for Federal Student Aid (FAFSA) is the form that college students can file in order to find out if they’re eligible for student financial aid. There are several different types of student loans that you may qualify for based on your FAFSA responses. Find out more about the types of federal loans you may be able to receive when you file your FAFSA.
Types Of FAFSA Loans
The FAFSA helps you qualify for several types of federal student aid programs. The most common types of aid that students get through the FAFSA are:
- Subsidized Stafford Loans: These loans have a low interest rate. The government pays the interest while the student is enrolled in college.
- Unsubsidized Stafford Loans: These have an interest rate that is almost double that of the subsidized Stafford Loans. This interest accumulates onto the outstanding balance. Students can usually get these types of loans regardless of income or circumstances.
- Direct PLUS Loans: These loans are given to graduate students, professional students or parents of dependent undergraduate students to help with additional education expenses that other types of financial aid don’t cover.
- Perkins Loans: These loans are lent directly by Title-IV eligible schools. These loans are typically given to students with exceptional financial need.
In addition to these federal student aid programs, the FAFSA is also used to determine whether you qualify for hundreds of state-run student aid programs, the Federal Work-Study Program, federal grants and many institutional aid programs.
Benefits Of Federal Loans
Student loans are a huge undertaking for any prospective college grad, but they are often necessary in order to complete your studies. If you do need to take out student loans, federal loans that you receive by filling out the FAFSA offer many benefits. The advantages of taking out student loans through the FAFSA include:
- Lower interest rates: Most federal loans have lower interest rates than private loans. In addition, these interest rates are fixed unlike most private student loan rates.
- Government-paid interest: With subsidized loans, you don’t have to pay any interest while you’re in school.
- Tax-deductible interest: Most interest on federal student loans is tax-deductible. If you pay any interest on the loans, you’ll receive a document that details your payments so you can enter that information on your tax return.
- No payments in school: You don’t have to start repaying your loans or making monthly payments as long as you’re enrolled in college at least half-time.
- Grace period: Federal loans you receive by filing the FAFSA offer a grace period after you graduate. You get until six months after graduation until you start having to make monthly payments.
- Loan forgiveness: Working in a public service job, such as law enforcement, teaching, the military or nursing, may make you eligible to have a portion of your federal student loans forgiven.
- Repayment options: With federal student loans, you can select a repayment plan that works for you, such as income-based or graduated payments. Private lenders aren’t required to offer these options.
- Payment postponement: If you can’t pay your bills or are struggling financially, federal student loans allow you to apply for deferment or forbearance until you get back on your feet.
- No credit check: There’s no credit check required for most federal student loans.
- No cosigner: You don’t have to have a cosigner in order to qualify for most federal student loans that you get through the FAFSA.
- Establishing credit: Paying back your federal student loans on time can help you establish a good credit record.
- Loan consolidation: Direct Consolidation Loans allow students to simplify their loan repayments into one bill and give them more time to repay their debt.
- No prepayment penalties: With private loans, you may be charged a fee for paying off your student loans early. This is never the case with federal student loans from the FAFSA.
Obviously, federal student aid that you get by filling out the FAFSA is preferable to student loans from a private lender. Borrowing from the government makes it easier to repay your loans on time. It also ensures that you have more repayment options and makes it easier to keep from falling further into debt.
The FAFSA is a great tool for every college student. The form may seem long at first, but just about every student who takes the time to fill one out gets some type of student aid. Keep in mind that while federal student aid comes with lots of benefits, you don’t have to accept all of the student aid that you are offered after filling out the FAFSA. Students are encouraged to take out only the loan amount they truly need. The less you borrow, the easier it will be to repay.