Getting a two or four-year degree can provide skills needed to support yourself, and if you’re interested in moving up the corporate ladder, higher education can get your foot in the door. Although going to college can create employment opportunities, there’s a price to education.
Some people are fortunate and they have parents who can pay their college tuition. This may not be the case in your situation. Your parents might agree to help with books and your living expenses, but with regards to writing a check each semester – you’re on your own.
No worries. College is expensive, and if you don’t have the bankroll to cover your own tuition, there are options. Federal student loans offered by the government provide the funds needed to complete a degree program. These loans are widely accessible. But before completing your application, here are five facts to know about federal student loans.
1. These loans are available to everyone.
Unlike scholarships and grants, which are only available to a select group of college-bound individuals, federal student loans are available to anyone who apply. Some people mistakenly assume that financial aid is only available to low-income students. However, regardless of your financial background or your credit history, you can apply and obtain federal funds. There are different types of federal aid. And while you won’t qualify for every type of loan, there is a loan for everyone.
2. There are yearly limits.
If you apply for federal student loans, understand that there is a limit to how much you can borrow during each year of school. These limits differ for dependent and independent students. Dependent students are enrollees who receive some type of financial support from their parents. Loan limits vary according to the type of loan. For example, dependent students with a Stafford federal loan can borrow $5,500 their first year, $6,500 their second year and $7,500 their third and fourth year.
3. Interest accumulates from day one.
Although you’re not required to make payments on some federal student loans until after graduation, interest accrues the day your school receives funds. This can significantly increase how much you owe upon graduating from college. To avoid a higher student loan debt, make periodic interest payments while in school.
4. There isn’t a long grace period.
Loan repayment for a Stafford or Perkins student loan doesn’t start immediately after graduation. But at the same time, you’re not given a long grace period. Payments for a Stafford loan begin six months after graduation, whereas loan repayment for a Perkins loan begins nine months after graduation. This gives you time to find employment and adjust to life after college. If you’re unable to afford your student loan payment at this time, talk to your lender about a deferment or forbearance.
5. Loan repayment takes place over ten years.
If you receive a federal student loan, you’re not given 20 or 30 years to pay off the debt. Federal loans are automatically placed on a ten-year repayment plan after graduation. If you need to lower your payment and extend your repayment term, you can consolidate with another lender. However, the longer you extend loan repayment, the more you’ll pay in interest.