How is a federal loan different from a private loan?
When comparing federal loans vs private loans, the key difference is that federal loans are provided by the government and private loans are provided by banks, credit unions, and other financial institutions. Each has its own student loan eligibility criteria, application process, and terms and conditions.
Why are private loans bad?
1. They typically offer less favorable interest rates than federal loans. The higher the interest rate attached to your student loans, the more that debt will cost you to pay off. But if your credit isn’t superb, there’s a good chance private loans will cost you more than federal loans.
What are the pros and cons of federal versus private loans?
Direct unsubsidized loans. But unlike with a subsidized loan, students are responsible for paying the interest that accrues during all periods. PROS AND CONS: Federal student loans may carry lower interest rates than private loans, and they have more repayment options for students.
What are the disadvantages of private student loans?
Disadvantages of Private Student Loans
- Eligibility depends on your credit score — in this current financial climate, you will probably need at least a 700 FICO score to qualify.
- Most lenders require you to have a cosigner (who also has a high FICO score)
- Higher interest rates than federal student loans.
Will a private loan affect my financial aid?
And the costs are only rising. Although financial aid, including scholarships, grants and federal student loans, can offer low- or no-cost ways to pay for a degree, private student loans can bridge the gap between student aid and the actual cost of attending school.
Why should you only take out a private loan as a last resort?
Consider Private Loans A Last Resort Option Several reasons. For one thing, private lenders charge much higher interest rates as compared to federal student loans. Secondly, you won’t get as much flexibility in terms of repayment plans.
Which type of loan is based on financial need?
There are three types of federal student loans. They’re all provided by the government through the Federal Direct Loan Program. Direct Subsidized Loans are based on financial need. Direct Unsubsidized Loans are not based on financial need.
How much money can I have in the bank for fafsa?
A nominal value of $200 or $300 may be listed, but the reality is that there is no good reason to include anymore cash assets than that because no one else in their right mind does. Cash assets sink financial aid eligibility, but are virtually untraceable unless admitted to on the FAFSA.
Does fafsa look at income or assets?
Impact of Assets on the FAFSA The impact of an asset depends on whether it is a student asset or a parent asset. The FAFSA has a simplified needs test that causes assets to be disregarded if the parent income (or student income, if the student is independent) is less than $50,000 and certain other criteria apply.
How far back does fafsa look at parents income?
In financial aid, there’s no look-back period. However, you may have some timing issues if you’re thinking about sheltering assets for financial aid purposes. Here’s what I mean. If you have $200,000 sitting in a bank account, it will generate interest that gets reported on your tax returns.
When can you stop using your parents income for fafsa?
A student age 24 or older by Dec. 31 of the award year is considered independent for federal financial aid purposes.