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Top 10 Federal Student Loan FAQs

1. How do I apply for a federal student loan?

  • You can apply for a federal student loan online at the Federal Student Aid Website. The process is quick, easy and sets you up to reapply every year you are in school and continue to need assistance.

2. How much money will I get?

  • That depends on a variety of factors, the primary one being need. Your Federal Student Aid need is determined by your prior year’s tax returns, or the tax returns of your parents/guardians if you were too young to file or are being claimed for other reasons. Another contributing factor is what school you go to. Different schools have different tuition amounts and different ways of determining how much each student should get based on need.

3. When will I get my money?

  • Again, this depends on what college you are going to, as their rules for disbursing financial aid are different. Many colleges will allow you to sign up for direct deposit of your money and will usually make it available (or by check) to you within a week or two before classes start.

4. Do I have to pay the money back?

  • Yes you do - all of it, but under most circumstances, not until after you graduate college (or leave school for other reasons). Under normal circumstances when you graduate or drop below a certain # of units of attendance, you will be expected to begin paying back your student loan 6 months later. For subsidized student loans, this is when the interest will start accruing as well.

5. What’s the difference between a subsidized and unsubsidized student loan?

  • Subsidized student loans do not accrue interest to you until after you get out of school and need to start paying the money back. So if you borrow $10,000 over the course of 4 years, when you graduate you will owe just $10,000. Unsubsidized loans begin to accrue interest the moment you take the loan out, at the agreed upon rate, so if you take out $10,000 over 4 years at 6.5% interest, by the time you graduate and need to start paying your loan back you will owe more than $12,500.

6. What if I can’t get a job or afford my loan after I graduate?

  • You can get deferments until you receive a working wage after college under most circumstances. Keep in mind that this is a Federal Program and the lending institution has all the power of the government behind it. You can not declare bankruptcy to get out of student loan obligations, and they can garnish your wages if you are working and still do not pay them.

7. How long do I have to pay the loan back?

  • Under most circumstances there is a 10 year plan available for paying back your student loans. There are extended plans available if you are having trouble making payments. Keep in mind, though that making arrangements that lower your payment or extend the time you have to pay will increase the amount of interest you owe.

8. Can I start paying back my loan early without penalty?

  • Absolutely! And if you can, it is highly-recommended that you do so!

9. Do I have to take out a loan every year I’m in college to avoid having to start payments?

  • No. Whether or not you take out a loan in a given period does not affect when you have to begin making payments on loans you have taken out in the past. The only determining factor for that is if you drop below half-time status (usually 6 credit hours), or withdraw from school.

10. My friend has been in college part-time forever just to keep from having to pay back her loans. Can she do that?

  • Yes. Many schools, however have systems in place to eventually purge “career students”, so don’t automatically assume your school will let you stay part-time like that forever. Also, if you intend to use this technique, make sure you are NOT taking out loans to pay for the schooling! One accident or misfortune that takes you out of school for a semester and you could find yourself facing a HUGE mountain of debt!

Relevnt Links:

Federal Student Loan Consolidation

Federal Student Loan Servicing Page