Most college students will need some type of financial aid to help fund their college education. College scholarships provide the ideal type of funding, because unlike student loans the money received in a scholarship award will never need to be repaid. However, for the majority of college students, the money they receive through scholarship awards will not be enough to cover the full costs of their college expenses. Once a students free money options for college have been exhausted, student loans can be a useful tool to help fund a college education. There are two main types of student loans for college, federal student loans and private student loans, and though both serve their purpose for providing money for college, the two types of student loans are different. Here are 7 reasons college students should apply for federal student loans first:
1. Your Credit Doesn’t Matter
There is no credit check required for most federal student loans (PLUS loans will require the borrower to pass a credit check). Federal student loans are based upon a borrowers financial need and not a borrowers credit profile, therefore nearly any student regardless of their credit (or lack of credit) is eligible to apply for federal student loans. Students can apply for all federal student loan programs by completing a FAFSA.
2. Lower Interest Rates
Federal student loans typically offer the lowest interest rates available. Since federal student loans are able to offer a low, fixed interest rate to their borrowers, this makes federal student loans the least expensive student loans available.
3. You May Qualify For Subsidized Loans
Some federal student loans are subsidized. Depending on the type of federal student loans a student qualifies for, they may be eligible for federal student loans that are subsidized. Most student loans will accrue interest charges while the student attends school. If a student qualifies for a subsidized student loan, the federal government will pay the interest charges while the student is in school. The only way to know for certain if you can qualify for a subsidized student loan is to complete a FAFSA.
4. Flexible Repayment Options
Federal student loans offer some of the most diverse and flexible repayment options. Federal student loans have a variety of different repayment options available to their borrowers, many more than a typical private student loan can offer. Some repayment options are income contingent, and some programs (in exchange for qualified employment or service) will even forgive a portion of the individual’s student loan debt.
5. No Cosigners Required
There are no cosigners required to secure federal student loans. Since federal student loans are based upon the borrowers financial need, the student will never need to obtain a cosigner in order to help secure the loan. Private student loans are based upon a borrowers credit, so any borrower who has poor or little credit history will likely need a creditworthy cosigner to help qualify for the loan.
6. Easy To Consolidate
Federal student loans will offer you the option to consolidate. Private student loans can also be consolidated, however many private lenders are no longer consolidating private student loans. With federal student loans, you will have the option to consolidate through the federal program if you choose.
7. Eligible For Loan Forgiveness Programs
Federal student loans are eligible for forgiveness. With federal student loans, the federal government will cancel all or part of your loans in exchange for things such as volunteer work, military service and working specific jobs with certain communities (plus meeting other requirements within the loan forgiveness program).