Qualifying for student loans
Student loans enable a person to get education by overcoming all the financial shortcomings. Student loans are provided for various types of courses conducted by various universities, schools and other centers at the domestic level as well as international level. These loans are provided either as individual loans to students or jointly with the parents so that repayment can be ensured. After the course is completed, these loans become repayable. There are some qualifying norms that have been prescribed for getting student loans. These norms vary from one country to another and even from one state to another.
Qualifying for student loans in united states
United States Department of Education has a special formula for ascertaining the eligibility of a student for the student loan. This is called as EFC or Expected Family Contribution. This formula is based upon the financial sources of parents of student and the financial sources of the student. A student has to qualify in this formula for obtaining student loan. Grants are provided to students purely on the basis of financial needs. The Department of Education consider money of a student in the UTMA/UGMA accounts and the educational savings accounts for ascertaining if a student can take the loan on the basis of EFC formula or not. All the assets maintained by the parents of student under the section 529 Plans are described as the parents assets. The student is required to complete a form called as FAFSA or Free Application for Federal Student Aid in order to get the student loan. The qualifying criteria for the federal student aid includes high school graduation or G.E.D earning, enrollment in the eligible study programs as recognized by the federal government, satisfactory maintenance of academic progress, no previous default in any type of student loan, certification regarding taking of loan for educational purpose only, possessing a social security number and being a citizen of United States or eligible Non-Citizen. If any student fulfills the above qualifying standards, he is eligible to get the student loan from Federal Government.
Other related aspects
Student loans are provided by federal government as well as private lending institutions like private banks etc. It has been generally seen that a student finds it very difficult to complete the course by taking loan from one institution only. For example, a student may get grant from federal government but for completing the course successfully, he has to take student loan from some private sources also. Private lenders have their own qualifying standards for student loans. They require a student to be a citizen of United States or a permanent resident of U.S, he must be enrolled for attending the school at least on half-time basis and applying for the student loan through FAFSA only. Whether it is a Federal Student Loan or loan provided by some other source, the amount of loan provided to student depends upon the details provided in the FAFSA form.
There are many types of student loans for which a student can qualify for. First is the Federal Subsidized Stafford Loan. The interest on the loan amount is paid by the federal government throughout the loan term and up to 6 months after the completion of course. Similarly, a student can also qualify for Federal Unsubsidized Stafford Loan. The interest has to be paid back by the student. The student can repay only interest portion of the loan during the course and after completion of course, whole loan amount becomes repayable. Federal Parent Loan for Undergraduate students is the other type of loan for which a student may qualify. Also called as Plus loan, this type of loan is for the dependent undergraduate students and provided to parents. The parents must be citizen of United States, and must have defaulted in any type of FSA program earlier. They need to have a good credit rating and parents are responsible for the repayment of principal amount as well as the interest component.
Alternative loan is other type of student loan available in United States. This loan is provided in addition to Plus loans and Stafford loans. The student must have a good credit rating for qualifying for these types of loans.
Subsidized Stafford loans are provided on the basis of financial need and status of a student as well as his parents provided in the FAFSA form. The yearly borrowing limits given under the subsidized Stafford loans are generally lower than the average tuition price of various colleges in United States. Similarly, for getting unsubsidized Stafford loans, a student does not get loan amount on the basis of demonstrated financial requirements. All students can apply for this type of loan. It is very important to understand here that when a student has applied for the loan in the FAFSA and has obtained the financial aid eligibility, he can also approach other lenders and financial institutions for getting student loan.
There are many lending institutions in United States that are providing Stafford loans at 1% interest reduction. In case of Parent Plus program, the eligibility of student is not ascertained on the basis of FAFSA, though some schools can ask parents of a student to fulfill FAFSA. Qualifying standard for this type of loan is the adverse credit history of parents. Parents of student should not have any overdue repayment for 90 days pertaining to any type of debt and should not have discharged in the bankruptcy case at least for the past 5 years. Similarly, there should be not foreclosures, repossessions, tax liens, garnishments and loan write offs pertaining to parents for the past 5 years. In case of Grad Plus loans, though FAFSA plays an important role, eligibility is not determined by this form only. Credit check is done and of the borrower is having any bad credit history ; he is not entitled to get the loan. When a student goes for a non-federal student loan or private loans, he is able to get higher limits than the federal student loans but private loans are not guaranteed by the federal government. The loan amount can be used for any education related expenses. A person with bad credit can also apply for these loans along with co-signor.
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