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Federal Financial Aid

Article on Federal Financial Aid

There are many ways that you can fund your college experience. Researching and utilizing the options available from the Federal Government is an excellent starting point for planning on how to pay for college. There are multitudes of funding options but those that come directly from the government are usually the options which carry the least amount of interest since they are federally subsidized. Usually federal financial aid is referred to as a direct loan as they originate with the U.S. Department of Education.

FAFSA Procedure

You have the choice of either using grants, subsidized, unsubsidized or PLUS loans which are available to those who fill out the FAFSA form online. This is a crucial step because without filling out the Free Application for Federal Student Aid (FAFSA) you are unable to be awarded federal aid. The application can be submitted online or by mailing a paper application. Typically you must include all personal information about both you and your parents which encompasses contact information, social security information, earnings from your tax forms which were filed with the government.

How the FAFSA Information is Used

The information on the application is used to determine how much aid you will be awarded as well as the code of the school you plan on going to. The results are then sent to the school and processed by their financial aid department who then notifies you of an award package if you have qualified. You can choose which options you would like to take from the package whether they are subsidized, unsubsidized, PLUS loans or the coveted grant which wouldn’t need to be repaid.

Cost of Federally Subsidized Student Loans

Currently the interest rates for federal financial aid are as follows: Direct subsidized and unsubsidized loans currently charge 4.5% interest if you have a disbursement date between July, 1 2010 and June 30 2011, after that the rate goes up to 6.8% interest per year for all students. This is the cheapest option available for you to take, so if it is offered, jump on it! Federal PLUS loans are mainly taken on by the parents of the attendee, and the current interest rate for a Federal PLUS loans is 7.9%. Grants are free and if they are offered to you TAKE THEM! Not only do you not need to pay this money back, because it is not a loan you are not charged interest!

Disbursement and Repayment

Once you have accepted an award package funds will be disbursed either directly to the school or into your bank account to cover tuition expenses or to you as an individual. Depending on what type of federal financial aid you choose you may or may not start accruing interest once the disbursement is made. Funds are disbursed every semester to pay for expenses. There is typically a 6 months grace period after graduation before you need to start making payments. Alternatively, if you cannot pay yet you can defer your loans or put them into forbearance which enables you to develop your career before having to pay out a large amount of your paycheck to cover the costs of your school loans.

Regardless of which federal financial aid option you choose, receiving aid from the government should be your first choice when it comes to funding a college education. No one wants to worry about bills all the time while they are in college, and federal financial aid is a straightforward and relatively stress-free way to pay for your education. Learning how and where to apply for federal funds is imperative if you are in need of financial assistance. While you may still need to apply for private loans, federal aid should always be sought first.