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Student Loans in Default Consequences and Tips to Get Out

With the rising cost of college tuition along with lowering job prospects, it isn’t surprising that more and more people have difficulty paying off their student loans. There has been a marked increase in student loans in default since 2008 and the figures of defaulted student loans have risen for more than $80,000 from last year.

Delinquency and default

Failure in making your loan payments when they are due leads into delinquency. A delinquency period starts on the first day after you miss to make your loan payment. During the first 15 days you will receive at least one collection letter or written notice from your loan lender. After your student loans have been in delinquency for nine months (270 days), your loan holder will declare your loans in default (for the largest portion of private student loans this period is three months). In case you have trouble in making payments, it is strongly advised to contact your lenders as soon as possible, as they may have some special “default aversion” programs to help you during delinquency or you can negotiate with them to postpone your payments to help you find the solution for the problem. The most important thing is to contact your loan holder as soon as you receive their notice. Avoiding doing this can lead into deeper financial troubles and some of the student loans in default consequences are the following:

  • Damaged credit record
  • Cancellation of Federal Student Financial Aid eligibility
  • Restriction of Federal benefits like Social Security retirement benefits and Social Security disability benefits, but not Supplemental Security Income
  • Garnishments of your wages (up to 15% of your income)
  • Cancellation of certain repayment benefits
  • Extra fees and interest that are added to the original loan amount
  • Possibility of going to court
  • Cutting off of Tax Return
  • Loss of professional license.

Federal Student Loans in Default

Federal student loans offered by the US Department of Education such as Stafford Loans, Perkins Loans or PLUS Loans provide up to nine months grace period after graduation which is intended to help you find job or some other source of financing to begin repaying your student loans. In addition, federal student loans offer various repayment plans that are designated to meet different needs of the borrowers as well as student loan consolidation option. However, there is a large number of Federal student loans in default. After you have defaulted on your Federal student loan, the government goes for your wages garnishment without the court order and can independently take up to 15% of your paycheck because Federal student loans are not discharged in bankruptcy proceedings (except in limited circumstances).

Federal student Loans – Getting Out of Default

There are a few things that you can do to get yourself out of default. You have the option to:

  • consolidate your loans
  • rehabilitate your loans or
  • renew your loan eligibility.

Federal Student Loans Consolidation

Student loans consolidation option allows you to replace several loans like Stafford Loans, Perkins Loans or PLUS Loans with just one and to repay all loans with this one at lower interest rates and for extended period of time. Once you consolidate your loans your loan will be out of default. In addition, you will be able to get income sensitive repayment plans, you will no longer get collection calls, you will be eligible for deferments and forbearance, and you will be eligible for new loans.

Student Loans Rehabilitation

Rehabilitation can call off negative consequences of student loans in default. This program involves several steps. First, an officer from default Collections will arrange a monthly repayment plan for you and you will have to agree with the monthly payment sum required to participate in rehabilitation program. You have to make at least nine on-time loan repayments to qualify. After completing of rehabilitation agreement, the underwriter transfers the loan to the loan servicer and your loan is considered to be out default. Furthermore, you will be able to apply for deferment and forbearance as long as these haven’t been exhausted during the period your loan was in default.

Renewing Student Loans Eligibility

You can apply for new loans even though you are in default, but you have to work up your default status before that. First thing you should to is to call your loan lender and make a repayment agreement. After that you must keep up with payments and after six consecutive monthly payments you will reestablish your eligibility and be able to receive new student loans and grants.

Note: You must apply for any of these options to happen.

Private Student Loans in Default

With private student loans you do not have the advantage of a nine months period in case you miss payments on your private student loan. You should bear into mind that if you are a private student loan borrower, your loan will usually go into default as soon as you miss the payment, although some private loan lenders offer three months period before declaring your loan defaulted. This default period will be outlined in your loan contract. Therefore, you should carefully review your private student loan contract to learn what are your rights and obligations related to the loan. For the wage garnishment in case of private student loans, the lender must get a court order and the rules governing this sort of garnishment vary from state to state.

Private Student Loans – Getting Out of Default

There are fewer options for getting out of default for private loan borrowers like Sallie Mae or Wells Fargo than for people who have default on their federal loans. One of available alternatives is forbearance, which means that the borrower only has to make interest payments for a period of time approved by the lender. Although this may provide some temporary relief, it actually increases the sum you have to pay back, since the principal remains the same and the interest continues to accrue.

Being into default does not have necessarily negatively to affect your finances, career or life. All you have to is not to panic but to take the first steps in the direction toward solution of your problem. Contact your loan servicer and ask for assistance. Loan forbearance, consolidation or rehabilitation program may help you to get out of default.

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Exploring AES Student Loans – What You Should Know

About AES Student Loans

American Education Service or AES is a loan servicing company that provides student loans to students or their parents to assist them in financing college education. AES student loans are offered by the U.S. government through the Federal Family Education Loan Program (FFELP). To be able to use services offered by AES, you have to register online and after that you can take advantage of their numerous helpful alternatives that include: loan repayment, account administration, options for the loan deferment and various additional tools. With convenient online applications, AES makes the complicated process of student financial aid management easy. AES offers management services for both federal and private loans, such as Federal Stafford Loans, Parent Plus and Graduate Plus.

Eligibility Requirements

To qualify for AES student loans, an applicant needs to be a US citizen or eligible non-citizen. Furthermore, the borrower must be enrolled in school that participates in the FFELP at least at half-time basis and he must not have previous education loans. Students whose loans are into default are not eligible.

To get one of the loans through AES, you have to fill out the FAFSA (free Application for Federal Student Aid).

AES Student Loans Benefits

The main benefit of AES student loans is that it makes the complicated process of applying for student financial aid and private student loans more convenient for students and their families.  All affordable types of student loans can be obtained through the online applications of AES. AES assists in the whole borrowing procedure, from loan application to loan guarantee, from choosing loan repayment schedules and repayment modes to actual loan payment.

Secondly, the interest rates are low and vary from 5.6% to 8.5%, depending on a loan option. In addition, there is a six-month grace period offered. Also, there is no penalty for early paying off a loan early.

Additional advantage is the ability to administer the whole user account. It’s valuable option because it’s simple. For instance, when a client logs in, he or she is able to see the overview of an account, she can make payments or read important notification. He could also keep informed about your loan details, view loan rates and check the loan balance.

Ways to pay AES loans and Repayment Options

There are different ways of paying off your AES student loan available, and the following three are the most common: direct debit, internet payments and check payments.

Direct Debit

Direct debit is the most convenient way to make your student loan payments. Automatic electronic transactions imply your payment is always on time, so you don’t have to worry each month would you make your payments on time.

Internet Payments

You can authorize a one-time electronic loan payment to your account. You can do this by using your account numbers and your banking institution’s routing number.
You should note that this is a one-time payment; using it does not authorize an electronic payment every month.

Check Payments

You can choose to mail your check or money order to AES’ payment servicing center. Be sure that you include your AES account number on your check.

There are also five different repayment plan offered for federal student loans borrowers.

Federal Loan Repayment Options

Repayment plans for federal student loan borrowers include: Level Plan, Graduated Repayment Plan, Income-Sensitive, Income-Based (IBR) and 25-Year Extended loan repayment.

  • Level Repayment Plan – This plan allows you to make smaller monthly payments and the monthly repayment amount remains the same throughout repayment period.
  • Graduated Repayment Plan – the monthly payment is usually interest-only for a certain time and it varies during the repayment period.
  • Income-sensitive Repayment Plan – The monthly installment is based on borrower’s monthly gross income and student loan debt.
  • IBR Plan – The monthly repayment is based on borrower’s monthly income and its family size. IBR helps borrowers who may be experiencing financial hardship to deal with their monthly payments.

Teacher Loan Forgiveness and Discharge

ABS student loans provide partly or full loan forgiveness options for teachers who have been working for at least five consecutive academic years on full-time basis in low-income schools.

There is also a loan discharge option available. You may qualify for discharge if your school is: closed; have signed your name without your authorization; failed to pay a tuition refund or untruly certified your ability to benefit from education.

Student Loans without Cosigner

AES student loans offer a no cosigner student loan option. Student Loans without Cosigner alternative is available for students who have an established credit record and a good credit history.

It is unusual for students to be eligible for private student loans without a cosigner, since most students lack a good credit score or have no credit history, but there are few ways for students to find a private student no cosigner loan options, so in case you have established your credit record and have a good credit score, you can try to get a no cosigner student loan.

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What is the FAFSA and How to Complete It

The Most Important Facts on FAFSA Application Process

About the FAFSA

Thousands of college and university students in the USA today utilize some sort of federal student aid as assistance in paying for their post secondary education. In order to become eligible for US government financial support provided by the Department of Education, as a first step students must complete the Free Application for Federal Student Aid or FAFSA, the universal application for all categories of federal student aid. The best approach to filling out your federal student aid application is to take enough time in advance to prepare yourself for filling out the FAFSA which will make application process relatively easy. This in particular means that you should try to collect and prepare all the needed documentation and information before you go ahead and complete the application. Reason for doing this is obvious, that kind of preparation will save you a huge amount of time and prevent for making any mistakes in your application. The earliest date you can complete the FAFSA is January 1st, and the deadline for submitting it is June 30th  for the upcoming school year.

Before completing the FAFSA, the first thing to keep in mind is that you have to meet certain federal student aid eligibility requirements to be able to qualify for federal student aid.

In order to fill out your FAFSA application, you are going to need the something of the following information and documentation:

  • Social security number
  • Institutional codes for each school you plan apply to
  • Your bank statements
  • Driver’s license
  • Foreign registration card, or Permanent Resident card if you are not a US citizen
  • Tax returns and W-2 forms
  • If you are still dependent child you’re going to need your parents’ tax documents
  • In case you’re married – your spouse’s tax documents
  • Current untaxed income statements such as veteran’s benefits, welfare, etc.
  • Business and farm documentation
  • Investment records and statements
  • Mortgage documentation

After collecting all the necessary information and documentation, the actual process of completing your FAFSA should not be difficult. There are two ways of completing the FAFSA: you can complete it online or in the written version. The more convenient way is to fill it out online, since the paper version will take you longer to complete it and submit it via regular mail.

The Written FAFSA Option

In case you decide to fill in the printed form, you can get a copy by requesting one at fafsa.ed.gov or by calling 1-800-4-FED-AID. Also, you can print your copy from federalstudentaid.ed.gov. or request a copy at your college’s student financial aid department.

Completing the FAFSA Online

In order to complete the online FAFSA option, first thing to do is to go to the official FAFSA website, fafsa.ed.gov . Application process is pretty simple: just follow the instructions provided and easily complete your application online.

Prior to formal submission of your application, you need to have your PIN which serves as your identity verification and it is rather similar to personal number that you would use to access any of your personal accounts. To get your PIN, visit www.pin.ed.gov.

FAFSA Application Steps

The FAFSA comprises seven most important segments, and each section has its own purpose, questions, and required information that applicants are required to submit. Applicants can always go back and make edits once they have finished filling out the whole application.

1. Personal Information

This section includes personal data such as applicant’s name, date of birth, social security number and address. The furtherer questions in this part will include information on her or his citizenship or residency status, academic progress and whether or not she or he may have an illegal drug conviction on your record.

2. School Choice

In this section of FAFSA applicants will be asked to provide list of ten schools they are interested in. Additional information required will involve their enrollment status and selecting whether or not they are interested in federal student aid programs.

3. Dependency Status

In this part of FAFSA application, students are going to find a list of questions intended to determine their dependency status. The list of questions appears as the following:

  • Are you a veteran of the United States armed forces?
  • Are you currently serving on active duty in the United States armed forces for purposes other than training?
  • Are you married at the moment?
  • Were you born before January 1, 1987?
  • Will you be enrolled in a master’s, or doctorate program at the start of the school year?

If your answer to any of the previous questions is yes, you may be considered as an “independent” for the approaching school year.

4. Parent Information

In this section student will be required to provide basic information about her parents such as their names, social security numbers, marital status, and your family household, like the size of the household and the number of persons from her family who are going to be attending college or university during the next school year.

5. Financial Information

This segment requires information on applicant’s last year’s tax return, current income and property. In case applicant is still dependant, he’ll have to provide financial information about his parents and himself alike. If he is determined as an independent, he won’t have to give financial information about his parents.

6. Reviewing and Submitting the FAFSA

In this part of FAFSA applicants are given the chance to review and save their application. In addition, students will have to agree to a legal statement serving as a certified confirmation that all the information provided during completing the FAFSA are accurate and honest, and that they won’t use their federal student aid for anything else besides academic-related purposes. By entering his social security number and PIN applicant should be able to go right ahead and officially submit his application by choosing submit option.

7. Confirmation

After submitting the application, applicant will then be taken to a confirmation page where a random confirmation number, and information release number will be provided which means that the FAFSA application is successfully completed.

The Student Aid Report

Once you have completed your FAFSA you will be sent a Student Aid Report (SAR) which contains all the information you provided in your application as well as your eligibility for particular types of federal student aid and your EFC (Expected Family Contribution of financial need). After two or three weeks the SAR will be sent by mail to your home address provided in the application.

At the end, it’s very important to bear in mind that in order to obtain a federal student aid, a new FAFSA application should be filled out for the each college year.

Video Guide  to Learn How to Fill Out the FAFSA in 7 Easy Steps

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Understanding Federal Direct Student Loans Program

Direct student loans are federal educational loans with low interest rates. These loans are provided by the US Department of Education with the intention to help students and their parents to pay for postsecondary educational expenses and usually cover tuition costs as well as additional expenses like transport, books, food, accommodation, etc. Direct Student Loans should not be confused with uncertified student loans, which are regularly characterized as direct-to-consumer loans.

The main benefits of Direct Student Loans are following:

  • Low interest rates;
  • Student borrows money directly from the federal US government, without third-party lender such as bank or financial institution;
  • Borrower have the opportunity to choose from numerous repayment plans which can be switched at any time, if the borrower needs a change;
  • Borrower has online access to his or her Direct Student Loan account information via his servicer’s website.

As it was mentioned before, the lender of Direct Loans is the Department of Education. Before the passing of SAFRA (Student Aid and Fiscal Responsibility Act) in 2010, federal loans for students could be offered as a part of the Direct Loan Program or the FFEL (Federal Family Education Loan) program, but SAFRA basically eliminated FFEL Program, and now most federal student loans are offered through the Direct Loan Program.

The four main types of federal student loans are:

  • The Subsidized Stafford Loan
  • The Unsubsidized Stafford Loan
  • The Direct Consolidation Loan
  • PLUS Loans

The Subsidized Stafford Loan

The Subsidized Stafford Loan is offered as a financial aid for students in who are proved to be in financial need, and it can be obtained without charge of interest during the time student is enrolled in school and during grace period and approved deferment periods after graduation.

The Unsubsidized Stafford Loan

Unsubsidized Loan is not based on student’s financial need. This loan option offers a choice to borrow of paying the interest while still is enrolled in college or university as well as during grace period and deferment period or can choose to accept for the interest to be added to the principal amount of his student loan.

For the both of the Stafford Loans student can apply via the completion of FAFSA.

The Direct Consolidation Loan

The Direct Consolidation Loan is category of loan which allows borrower to replace multiple student loans with just one. The Federal Direct Consolidation Student Loan Program lets borrower to consolidate most federal loans.

The Direct PLUS Loan

The Direct PLUS Loan is federal student loan for parents of the depending students intended to assist parents to pay for their child’s school expenses. To be eligible for the Direct PLUS Loan parent and student must meet certain requirements: must be the U.S. citizens or eligible non-citizens, parent must be the biological or adoptive parent, and in good standing with earlier loans and the student-depending child must be enrolled at least half-time at school participating in the Direct Loan Program.

Student loans provided under the Direct Loan Program will also require that applicants sign a Master Promissory Note (MPN) that will serve as a guarantee of their ability to repay the loan.

To sum up, the Direct Student Loans are federal education loans offered by the US Department of Education. Therefore, loan comes directly from the federal government, without involvement of third-party lenders like banks or financial institutions.

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Introduction to Federal Student Loans for Education

After high school, many students are unsure of what to do with their lives. They have the option of going to work or enrolling in college. Many who want to enroll in college do not have the money that it takes to pay for tuition. In this situation, students can borrow much of the money they need from federal student loans. If you are about to graduate from high school or you are thinking about going back to college, understanding how student loans work can be extremely helpful.

Direct Loan Program

The federal government offers a Direct Loan Program through the Department of Education. With this program, the federal government loans money directly to students, with the help of loan servicers. This means that when you borrow money from the Direct Loan Program, you’ll be able to get any help you need from an individual loan servicer instead of having to deal with the Department of Education.

Types of Student Loans

When you want to get involved with federal student loans, there are a few different types of loans that you could pursue. Two of the most common types of loans are Stafford and Perkins loans. Stafford loans are typically available to anyone who wants to go to school, regardless of credit history or income. With Stafford loans, you can get a subsidized loan or an unsubsidized loan. Whether you qualify for a subsidized loan will depend on the information contained in your Free Application for Federal Student Aid or FAFSA. If they determine that you have a significant financial need, then you can qualify for a subsidized loan. This means that your interest will be paid while you are in school, and your loan interest rate will be lower overall.

The Perkins loan is a similar type of loan, except it is only for individuals who have a significant financial need. There is a maximum amount of money that you can borrow each year with the Perkins loan program. If you still need to borrow money after the Perkins loan, you can use a Stafford loan.

PLUS loans are another type of federal education loan that you can get from the government. These loans are designed for parents of college students or for graduate students. Eligibility for this type of loan is also determined with the information from the FAFSA.

You also have the option of getting a consolidation loan from the government. With this type of loan, you can consolidate multiple student loans into a single package. The only have the option of consolidating once, so you need to make sure that you do it at the right time to get the best interest rate.

You may also be able to qualify for state-based student loans. These loans are actually issued from state governments and agencies instead of the federal government. Minnesota, Texas, Hawaii, New Jersey and Alaska are the five states that offer this type of program.


Getting education loans from the federal or state government can provide you with cheaper interest rates than what you can get in the private market. They are also easier to get qualified for because you do not have to have a certain amount of income or credit score. The repayment terms of these school loans can also be very flexible. You have the option of choosing from a fixed payment, a graduated payment or an income-based repayment option. If you are interested in going to college, looking into federal loans should be one of the first things you do. After scholarships, grants and other sources of funding have been exhausted, they are often the most attractive option.

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Applying for Student Loans Consolidation What You Should Know

Student loans consolidation is type of loan which allows borrower to replace several student loans like Perkins Loans, PLUS Loans or Stafford Loans or some private loans with just one. Under this plan, students can borrow enough money in one loan to repay other student loans. In case of federal student loans, the Federal Direct Student Loan Program lets you to consolidate most federal loans. For the private student loans, you can apply for a loan and use it to repay several private loans, so as to consolidate the sum and combine multiple repayments into one.

Benefits and Drawbacks of Student Loan Consolidation

There are some advantages of getting student consolidation loan, such as follows:

  • Student Debt Consolidation loan may have a lower interest rate than the rates on credit cards, so the loan should reduce student’s interest charges and help him/her eliminate credit card debt, finally.
  • You may have the opportunity to repay your student loans over extended period of time, which is advantageous because decreases your monthly payments.
  • If you take a private student loan, compared to federal loans, it is possible to negotiate more favorable interest rates with bank or other lender.
  • By joining your federal student loans with a for example, bank or other lender, you owe money to the bank instead to the government, which can be beneficial since if you fail to repay your federal loan, government can take hold on tax refunds; the bank cannot do this.
  • In case you have a negative credit rating report due to your previous student loans, a consolidation loan can let you repair your bad credit history.

On the other hand, there are some downsides of getting student loans consolidation as well.

  • Loan repayment extension, often from ten to thirty years means that at the end you will pay back the much higher total amount of the loan than the particular loans were themselves.
  • You may be eligible for interest release on condition that your student loan is guaranteed by the U.S. government. After student loans consolidation the bank will not give you interest relief.
  • In case you have bad credit or job history the interest rate charged on your student loan by the bank may be higher than interest charged under the federal student loans.
  • Consolidation loans are not available to all students; you must meet certain eligibility criteria to qualify for the student loans consolidation.

Eligibility Requirements

To qualify for the private Student Loans Consolidation Plan, you must meet some conditions:

  • You must be working or have some other source of monthly income allowing you to pay off the loan. Bank will estimate your ability to manage your debt based on your income.
  • The bank will also require the copy of your monthly budget statement to decide if you can handle your loan repayments.
  • To satisfy requisites set up by the bank or other lending institution you are dealing with, you may need a co-signor or collateral (such as a house or a car).

How to Apply for the Student Consolidation Loan and Repayment Options

The application process is very simple. You just need to fill the online application (also available in paper form) and Promissory Note and submit it to apply for a Direct Student Consolidation Loan. The application also includes your Borrower’s Rights and Responsibilities. In addition, you will have to complete Repayment Plan form in order to select your repayment plan. You can choose from several repayment option and some of them are: Income-Based Repayment which depends on your income, which means that the repayment amount is going to rise as your income does; Income-contingent and Income-sensitive plans for individuals with fluctuated income.

For self-employed individuals who have their income fluctuated, income-contingent or income-sensitive repayment plan can be most advantageous solution. According to this plans, as the borrower’s income rises and falls, the amount of their loan also does. In fact, income-contingent and income-sensitive plans are very similar to previous IBR and can be considered as it variations.

Before You Apply

There are some important issues to take into account when you are thinking of taking the student loans consolidation plan. Firstly, always do a little research on the loan characteristics, available repayment options, interest rates and other term and conditions. Do not sign any contract before you are sure that you completely understand all the matter you are getting involved with. Read as much articles about student loans and available borrowing options to figure it out which one is the most appropriate for you. To determine if you are eligible for a Student Loan Consolidation plan, contact department of Education, your bank or lending company to obtain all the necessary information.

In the long run, a consolidation loan typically pays more interest over time due to the extended loan term, so be aware of this before you apply for your student loans consolidation.

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Federal Stafford Loans for Undergraduate or Graduate Students

Stafford Loans are type of direct federal loans offered to students enrolled in accredited U.S. educational institutions of higher education with the purpose of giving them assistance in paying for their academic expenses. One of the most important conditions which student must meet in order to qualify for Federal Stafford Loan is to be enrolled at college or university at least on half-time basis. In addition, to be eligible for this student loan plan, applicant must attend a post-secondary institution that participates in Federal Family Education Loan Program, must be a U.S. citizen or national, a U.S. permanent resident or eligible non-resident.

Stafford Loan Plans

Federal Stafford Loans consist of following two types of plans:

  • Subsidized Loans which are introduced as a financial aid for students in economic need, and they are offered without charge of interest during the time student is enrolled in school and during grace period and authorized deferment periods.
  • Unsubsidized Loans which are not based on student’s financial need. Under this loan plan applicant may select option of paying the interest while still attends college or university as well as during grace period and deferment period or can choose to agree for the interest to be added to the main amount of his/her loan. With this alternative the total loan amount student has to repay is higher.

Stafford Student Loan Benefits and Drawbacks

With this student loan plan student can benefit in several ways. Firstly, you will enjoy loan repayment exclusion during the time you are in school, you will start to pay off the loan six months after you finish the school. Secondly, borrowing limit increases in some cases to up to $20,500 per year and finally, Stafford Loan is issued with fixed interest rate. This loan’s interest rate may differ depending on the date the loan was disbursed and in some cases on the education level of the student (undergraduate or graduate).  Additional advantage of Stafford Student Loan is the fact that Interest rates do not fluctuate with default risk, which means that all students are given the equal interest rate apart from of their major or their future career prospects.

Federal Stafford borrowers under certain conditions meet the requirements for the loan forgiveness program, for instance if they work as teachers in designated “low-income” schools, social services or if they join the army.

On the contrary, there are strict eligibility requirements and borrowing limits on Stafford Loan Plan and we recommend that you consider all the borrowing and repaying terms and conditions before you apply.

Stafford Loan Interest Rates

Given the fact that this type of loan is provided by the U.S. Government, it is offered at a lower interest rate than private student loans. Stafford loan interest rate may differ and are established upon the date the loan was disbursed. It also depends on the education level of the student (undergraduate or graduate).  As of 1st July 2006, Federal Stafford Loans are issued with fixed interest rate at 6.80% for unsubsidized loans and with somewhat lower rates for subsidized loans for undergraduate students. Starting from 1st July 2012 the fixed interest rate for all new subsidized loans will be changed to 6.80%.

How to Apply

  1. First step in applying process is to complete a FAFSA
  2. Than your school will evaluate your results and inform you of your Stafford loan eligibility by sending you an award letter
  3. After you have your award letter received you should apply for the Stafford Loan

Your Stafford loan lender will pay out your funds directly to your school. The money will be disbursed in two installments, typically in the fall and winter semesters. Your loan money will be used to pay your education and other school fees. In case you have extra funds left, your school will credit your account or pay you directly based on your school’s policy.

There are also other federal financial aids as well as private loan options available, so you should keep informed about all of these borrowing alternatives in order to choose the best student loan plan for you.

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Federal Perkins Loans for Undergraduate and Graduate Students

Federal Perkins Loans are a type of federal financial aid offered by the U.S. department of Education, intended to help students in financial need enrolled in one of 1,700 accredited U.S. postsecondary educational institutions to pay for their college or university expenses. The lender is college or university, rather than financial institution or Federal government. Government provides funds to each participating postsecondary institution and the institution then distributes funds to students in high financial need.

Under Federal Perkins Loan plan, undergraduate students can borrow up to $4,000 per year with a full amount of $20,000 borrowed during student’s undergraduate years at college. Graduate students or students in professional studies, may borrow up to $6,000 annually with a total sum of $40,000 of student loan. The definite amount you will receive is based on your financial need and amount of funds your college or university has available for providing students with this type of aid.

Eligibility Requirements

To be eligible for Federal Perkins Student Loan student must meet certain criteria:  he or she must be enrolled at least on half-time basis in postsecondary educational institution that participates in Federal Family Education Loan Program. Furthermore, she/he must demonstrate high financial need. Additionally, to be eligible for Perkins Student Loans student loan candidate must be a U.S. citizen or national, a U.S. permanent resident or eligible non-resident.

Perkins Student Loan Benefits and Downsides

In the contrary to other student loan options, under the Perkins Loan program students have advantage of nine months grace period, which means that your repayment of the loan will begin nine months after you finish college or university or fall under half-time college status. Further benefits of this plan are ten years repayment period and no penalty charged  if you choose to pay off the loan in shorter period.

Perkins Loans borrowers qualify for Federal Loan Cancellation or loan forgiveness program under condition that they work in authorized “low-income” schools or as teachers in designated high demand teaching areas like science, math and bilingual education. Peace Corps Volunteers also qualify for the loan cancellation.

On the other side, eligibility requirements are stricter than under, for example, some private loan plans and you will have to pay the higher monthly amounts because of the relatively short repayment period.

Perkins Loan Interest Rates

Perkins Loans are issued with a fixed interest rate of 5% during the ten-year repayment period. This loan plan has nine month grace period which allows you to find a job after graduating in order to repay your loan easily. You will also have to repay your Perkins loan in case you fall below half-time status at school or withdraw from the college or university.

How to Apply

In order to apply for this type of financial aid, you must first file a Free Application for Federal Student Aid (FAFSA), which can be completed online, at http://www.fafsa.ed.gov. You also must complete a Federal Perkins Loan Master Promissory Note (MPN) in order to receive this student loan. The MPN classifies the all the conditions connected to terms of borrowing and repayment of the loan.

You are also required to complete Perkins Loan Entrance Counseling before loan funds are paid. The reason of this counseling is to ensure you completely understand your rights and obligations connected to a student loan borrowing. Additionally, you must complete exit counseling after you graduate, withdraw or enroll in less than 6 units.

You are going to receive the loan funds from your school divided into two installments. There are two disbursement options: money can be placed in your student account for you or you can receive a check. The loan is usually divided into two payments, unless the loan is for a very small amount. As a Perkins Loan borrower, you don’t have to pay origination or insurance fees.

Federal Perkins Student Loan is one of the available financial aids for students today. Before applying for the student loan you should consider all the other existing borrowing options as well.

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