A New Student’s Guide to FAFSA Loans
Student loans have always helped young adults to find the financial assistance they need to complete their education. In this guide, we will discuss everything you need to know about FAFSA loans, one of the premier ways to pay off student loans faster, and an alternative for you if you can’t avoid student loans.
It is crucial for every family with kids – especially those who are about to complete their high school – to know what FAFSA is and how it works. Unfortunately, despite having a benefit, most families do not consider their options or dismiss the idea of opting for financial aid for college expenses. One of the major reasons is because of the confusion that they may not qualify for it. Even if you earn enough money, you may be eligible for some percentage of help and that’s where you could surprise yourself.
The financial aid doesn’t always have to be money for studies. In some cases, it could be in the form of lower interest loans, which every person – regardless of the type of money they’re making – would be definitely interested in. For this reason alone, it is totally worth it to give it a try and opt for FAFSA (Free Application for Federal Student Aid) for college-bound kids.
What Exactly are FAFSA Loans
FAFSA is basically a free application form that students or families apply to gain some kind of financial assistance to bear the college expenses from the federal government. Individual and state colleges, universities, and even private scholarship programs depend on the information of FAFSA.
The main objective of this financial aid is to figure out if you need any financial assistance and how much you qualify for. The financial assistance is offered on both need-based as well as non-need based.
How Does FAFSA Work?
The procedure is pretty much the same as any other financial aid program. The key is to determine the financial need of each individual student or family based on the answers to a series of questions. These questions are mostly related to the income, expenses, assets, and other similar factors associated with the students and their families.
There are also a question about the number of children in the family to calculate the Expected Family Contribution (EFC). Before the government decides to give some financial aid for college, it needs to be absolutely sure if the student deserves it and how much he or she can pay with their own resources.
There’s also a detailed asset calculation to determine fair results. For assets, FAFSA assumes that 20% of the student’s assets and 5.46% of the parents’ assets are needed to bear the college expenses for one year. The students are required to share information such as investments and bank account details for the calculation. It is, however, important to remember not to include the value of any life insurance policies, retirement accounts, or annuities. The equity within the family home is not a part of the calculation either.
Once you provide all this information, FAFSA will decide whether you deserve a need-based aid or a non-need -0based aid. In some cases, FAFSA may decide to give you a combination of both these aid options.
The Types of FAFSA Financial Aid
Before you reach out for the real deal, you can get some estimated on the Federal Student Aid’s online portal. Here’s more information on the different programs that you can apply for in each of the financial aid categories.
Need-Based Financial Assistance
Federal Pell Grants
The most common and attractive type of financial aid for students is the grant. That’s because grants do not need to be repaid. These are, however, difficult to qualify for if you do not check all the boxes on the FAFSA requirement. These grants are mostly secured for students who are in exceptional financial need. The maximum grant set for this academic year is $6,195.
Federal Direct Subsidized Loans
These loans are subsidized by the government so you can relax without having to worry about the interest for the entire college period and until the six months post-graduate period.
Federal Supplemental Educational Opportunity Grants
And while these are also non-repayable loans, they are very rare and only available for certain schools. These too are meant for students who have very limited resources to take care of their college expenses.
This program offers paid part-time jobs for students who require money for college expenses. This financial aid option is available for both undergraduate and graduate students.
Non-Need-Based Financial Aid
Direct Unsubsidized Loans
These are pretty similar to the subsidized loans with one distinctive exception: the loan interest is not paid by the government. The interest needs to be paid by the student or their family. In case of non-payment, the interest amount will be added to the principal loan amount.
These loans are available despite the financial situation as a part of a financial aid package.
Federal Plus Loans
The loans can be opted for by parents or graduate students. The Federal Plus loans are non-subsidized so it is the borrower’s responsibility to pay off the interest or it will accumulate and added to the principal.
Conclusion: FAFSA Loans for New Students
FAFSA loans don’t work as a loan forgiveness method. If you’re looking for loan forgiveness for nurses and teachers, this may not be the right option. However, for students, they’re perfect
Here’s the detailed breakup of the type of loans you can opt for. Just make sure you choose the one that offers you the most favorable terms to ensure timely repayment to avoid trouble.