Posted on July 30, 2015 in Financial Aid
Student loans are loans designed to help college students cover the cost of college tuition, books and other living expenses. It is different than a traditional loan in that the interest rate is significantly lower and you don't have to begin repayment until you finish school. Also the requirements for student loans are typically lower than traditional loans and are thus easier to get. One thing to note about a student loan is that if a student declares bankruptcy, they are still required to pay back the loan (as opposed to traditional loans and debts).
How to Apply for a Student Loan
For many young adults, the student loan is the first type of financing they will ever encounter in their lives and many of them have little knowledge on how to actually apply for a loan. The following section will detail how to apply for a student loan as well as break down the different types of loans.
Apply for the FAFSA
Every student applying for financial aid should complete the Free Application for Federal Student Aid - or FAFSA. This form will give you access to federal student loans, such as the Perkins Loans, Stafford Loans and PLUS Loans. Also, many scholarships and grants also require you complete the FAFSA, so its a good idea to complete the FAFSA even if you don't plan on applying for a student loan.
Student Loan Debt
Before you apply for a student loan, it is important that you are aware of the debt and obligations that come with them. The average student debt loan is around $20,000 and that doesn't account for interest and other fees that lenders typically add on. Also, student loan debt is NOT eliminated by a personal bankruptcy declaration - this is a debt that will stay with you for the rest of your life if not repaid.
Student Loan Tax Breaks
One good thing that comes from the high debts associated with student loans is that they offer a break on your federal income tax. Be sure to consult an accountant about the tax breaks and how to leverage them to save you some money come tax time.
Emergency Financial Aid Programs
The final section that we will cover is a program not known or widely advertised: the emergency financial aid program. These are limited student loan issuances that can provide quick funds in an emergency. They are often harder to apply for and get than a standard student loan, but if you are in a pinch, they are worth pursuing.