Borrowing for College - Department of Education Student Loans

Finding sources of college funding is an important step towards getting an education. College tuition and living costs are increasing and you will need to find funding wherever you can. You may even have to eliminate your favorite school from your list, even if your efforts have been rewarded with the chance to attend. Though you will have to take money into account when choosing a school, you should be able to get into one of your top five schools with the help of the department of education; student loans and financial aid can help you pay for it.

You should apply for student aid first. It is free to apply, you may receive extra funds that you won't have to pay back, and having applied for student aid is a requirement for receiving student loans. You can apply online with the department of education. An online forecaster and a college expenses calculator are now provided to help you estimate how much money you will need and how much you will receive.

Federal PLUS loans are available for parents who wish to help their children study, but if they do not meet qualifications to receive a PLUS loan, the student can apply for Stafford loans with a higher maximum loan amount. The minimum loan amount increases after every year in college, and as an example, your first year the maximum loan amount is $3500, or $7500 if your parents do not have access to the PLUS loan.

In the case of financial need, the government pays the interest on your loan during your time in college. This is called a subsidized loan. If you are borrowing a Stafford loan with the normal maximum limit, the entire loan is subsidized. If you qualify for a higher maximum loan amount, only the normal loan amount can be subsidized: $3500 of the $7500 for the first year, for example.

Federal loans can be taken from the Department of Education directly, or, through the FFEL program, through private lenders. The terms and payment options may vary, but federal loans now have a fixed interest rate at a maximum of 6.8%. Direct federal loans offer you the option of switching among a variety of payment plans, allowing you to make lower payments over time or even make payments based on your income.

If you have education expenses which are not covered by federal loans, you can take out private loans as well. These are available from many different sources with differing terms; you should contact them while you are comparing colleges to get an estimate on how much you can borrow. Graduate students can take out PLUS and Stafford loans, and you can consolidate your student loans at any time.

Even if you can't pay for your top choice, you can get into a good school if you use all the resources available to you, including Department of Education student loans, financial aid, and private loans.

By Adam Hefner