An Introduction to Student Loans and Debt Consolidation- Financing


In the United States, the federal government acts as a central point of access to financial support for education. Therefore, for almost all types of financial support (loans, grants, work-study or even parental loans), you must complete a free program for the Federal Student Aid Board (FAFSA), which you can do online here.

Tutorial: Student loans: Introduction

Tutorial: Student loans: Introduction

You also need to complete a FAFSA form if you want to apply for most state and school funded programs, including college loans, government funded grants, and educational assistance initiatives. The US Department of Education has established guidelines that are used to determine your right to financial support. There are many factors they consider, including (but not limited to) your income
Your parents’ income
Your net assets
The number of siblings in your household
Your family’s expenses
The number of siblings attending college at the same time


Even if you think you will not qualify it is important to complete a FAFSA form. You may be surprised and you do not want to miss an opportunity to access cheap finance opportunities. There are also some forms of federal funding support that are not dependent on financial needs, such as Direct Subsidy Loans and PLUS loans.

Submit your FAFSA form as early as possible, as many awards are awarded on a first come first served basis: The new due date is October 1. Your filing date also determines your place in the queue for school, state, and federal programs. Remember that you must submit a new form for each year that you apply for support.

What you need to fill in the FAFSA

What you need to fill in the FAFSA

It is a good idea to fill out the form online; but if you do not have access, you can use a hard copy and snail mail. With the web form you receive your study aid (SAR) report quickly and you will also be able to check that the form is filled in completely before you submit. This is a good idea that you do not want to be rejected because of a missed question. You can also download a spreadsheet to help you with the application process. (For more information, see pay for college without selling a kidney.)

You will need the following information to complete the sheet and actual application: Your driving license
Your Social Security number
Your tax return (Form 1040)
W-2 forms and all other income records. This includes Social Security, Child Benefits, Welfare, Pensions, Veterans Benefits, etc.
Your parents’ tax return (if you are a dependent)
Your bank and housing statements
Your record of investments (shares, bonds, funds, bank certificates, etc.)
Your citizenship (if not an American citizen)

The new due date has changed the rules on tax information you need to submit. Since October 1, well before tax is filed, you can now use a previous year’s tax information about your application. (For more information, see your child’s College Loan: Who should pay the bill?)

It usually only takes one to three days to get your PIN code for the program, which will be delivered online, or seven to ten days via snail mail. With a PIN code, the process of submitting FAFSA for one or more schools is very fast, usually just a few days. Be sure to list the schools you are applying for with the closest deadline first.

When processing, you will receive your SAR that you need to make corrections or changes to your FAFSA. This SAR will also be available to your chosen schools and processing can take much longer (typically two to six weeks). Call your school finance department for confirmation confirmation. All funds you are approved for are usually not available until the first week of the semester where you are enrolled.

Tips for completing the form

Don’t leave any empty spaces. Enter NA (Not Applicable) or 0 (zero).
Round all numbers to the nearest dollar, not comma or decimals.
Make sure you and your parents sign papers before sending.
Read all instructions carefully. Make sure you understand the issues that differentiate between you and your parents’ information.
Double-check your answers before submitting.
If filling out paper, be sure your answers are neat and easy to read.
If filling out the form online, be sure to print your copy and save for a safe place.
The deadlines differ for each state (and sometimes for each college or university). Be sure to check when your deadline is at the Department of Education website.

Different types of loans available

Different types of loans available

Federal Direct Loan: Direct Subsidized Loan and Direct Subsidy Loan
These loans are available directly from the US Department of Education and are either subsidized or subsidized (based on financial needs). The money from these loans can be used to pay for higher education on a degree granting institution, trade, career, technical school or even a community college, as long as the school is accredited to receive federal loan money. Click here to see if the school you are considering is approved. If you are eligible for a subsidized loan you will not have to pay any interest on the loan while in school (at least half-time) or during any grace or suspension periods. If you qualify for unsubsidized loans, then you will have to pay interest start from the first day you receive your funding. You do not have to repay the loan amount until after graduation. For information on how much you can borrow, see Federal Direct loans and Federal Direct loan frameworks.

Direct PLUS loan
PLUS stands for parent loans for students. Just as it sounds, this program offered by the US Department of Education is for parents of prospective students to enable them to cover any deficits in funding their children’s education. The maximum amount that can be borrowed is the actual costs less other financial support the student has received. The parent will need to pass a credit check. If they do not have a good credit score, they may still be eligible for assistance if they can find someone to jointly sign the loan. (For related reading, see finance your schooling with PLUS loans.)

Federal Perkins Loan
These loans are available for undergraduate or graduate students and funds are provided by the school, even if the loans are guaranteed by the federal government. Eligibility for these loans is determined by financial needs, and you can get up to a maximum of $ 60,000 to attend the degree school. The loan will be repaid within 10 years. For more information on what you can borrow, see Federal Perkins Loans vs. Federal Direct Loans.

Direct consolidation loan You can use this option if you need relief from the monthly payments on your student loan. You combine all your student loans and extend the amortization period up to 30 years. This simplifies your payments (just one per month) and reduces your monthly payments. But before you consolidate your student loans, you have to calculate the cost. By extending your loan you will greatly increase the amount of interest you will have to pay. You can also miss out on loan forgiveness that you may be eligible for with your original student loan. (For related reading, see Student Debt Debt: Is Consolidation Answer? And Debt Forgiveness: How to Get Out of Your Student Loans).


For each type of school-related financial support, you must complete the FAFSA form. Hopefully the information will help you fill out your application and make it easier to get some government loans to fund your education. (For related reading, see Student Borrowing: University Payment Plans vs. Federal Student Loans and College Loans: Private vs. Federal)