Student Loan Guide: Essential Insights for First-Time Borrowers

By Thea Felicity

Jul 08, 2024 04:41 AM EDT

Student Loan Forgiveness: Biden Administration Announces $7.7 Billion Relief for 160,000 Borrowers(ANDREW CABALLERO-REYNOLDS/AFP via Getty Images) (Credit: Getty Image)

For those starting on their college journey, student loans are often a consideration to help manage expenses. And it's a decision that many others have made as well.

According to the College Board, students and parents took out a staggering $98.2 billion in federal and private student loans for the 2022-23 school year. These loans are crucial for students who need to cover tuition, room and board, textbooks, and other educational expenses when grants and scholarships fall short.

However, it is crucial to have a clear understanding of the various types of student loans and their mechanics before committing to any loan agreement.

Types of Student Loans

Here's some important information to consider before you decide to borrow, according to Fox Business.

The US Department of Education provides federal student loans. Various loan programs cater to the needs of undergraduates, graduate students, and parents of undergraduates.

Accessing all federal student loans requires filling out the Free Application for Federal Student Aid (FAFSA).

Subsidized Direct Loans are a type of loan that is available to undergraduate students based on financial need. The government covers the interest on these loans while you're in school and for a six-month grace period after graduating or reducing your enrollment to less than half-time.

Unsubsidized Direct Loans are open to undergraduate, graduate, and professional students. These loans are easily accessible, regardless of financial need or credit history.

Direct PLUS Loans provide coverage for the entire cost of attendance at your school, distinguishing them from subsidized and unsubsidized loans. Grad PLUS loans are specifically designed for graduates and professional students, while parent PLUS loans are intended for parents of dependent undergraduates.

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How to Apply for Student Loan?

Before considering a student loan, it is important to explore all alternative options available. There are additional options available for securing financial assistance to cover college expenses.

When it comes to scholarships, there's a key difference compared to loans. Unlike loans that come with interest and need to be repaid, scholarships are a different story. They don't require repayment and are granted based on merit, such as academic or athletic achievements. 

If you're considering applying for federal or private student loans, it's important to gather certain information beforehand to expedite the process.

When it comes to tax returns, having a paper copy can be just as useful as using the IRS Data Retrieval Tool. It would be helpful to have the tax return from two years ago. It is important to have both your parents' and your own tax returns, in case you have filed taxes.

To be eligible for financial assistance, it is necessary to fill out the Free Application for Federal Student Aid (FAFSA). It is the tool that both the federal government and colleges utilize to assess your financial assistance.

Submitting your FAFSA application as soon as possible is highly recommended, as it is free to complete. Completing the task sooner increases your chances of qualifying for financial aid, such as grants.

In addition to federal assistance, you may qualify for institutional aid, which is provided by your educational institution. To be eligible, the submission of the CSS profile is required.

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