The Basics of Government Loans

While scholarships/grants will go a long way, most students also rely on government loans to pay for their education. Financial aid is available to everyone, regardless of their financial status. This money is available to you through the government and offered at a low interest rate. If you have not applied for financial aid before, apply this year. Even if you think you will not be eligible, apply anyway. You can choose to accept all of the assistance offered to you or a portion of it. The Free Application for Federal Student Aid (FAFSA) is the first step in applying for financial aid. Contact your financial aid office if you have any questions or concerns regarding the process.

While there are exceptions, most states ask that you do not fill out the FAFSA application until after January 1, but ultimately you have until June 30 to submit your application for federal aid for that particular school year. If you do not complete your application before June 30, you will have to fill out an application for the next school year (academic school years are July 1-June 30) and acceptance will be up to your school.

The Department of Education offers low interest rate loans to students. Subsidized loans are based on financial need. While in school and during the grace period, the government pays the interest on subsidized loans. Unsubsidized loans are available to all students regardless of financial need. You are charged interest on these loans while you attend school. You have the option of paying the interest as it accrues or postponing the interest payments until after you graduate, withdraw or drop below half-time enrollment. Students can borrow up to $8,500 per academic year under the subsidized Stafford loan program, and they can increase the amount to $38,500 per year with an unsubsidized loan.

A Federal Perkins Loan is a low-interest loan for both undergraduate and graduate students with financial need. It is provided with government funds, with a share contributed by the school. Depending on when you borrow, your level of need and the funding capabilities of your school, you may be able to obtain a Perkins Loan up to $6,000 per year.