Student Loan Basics

Most Hispanic students and their parents think of college perhaps as a cost and not quite as an investment which is what it is. They assume “well I don’t have a lot of money I cannot attend school” but that’s when financial aid comes into place, the less money that the family has available the more money financial aid will be able to help them with. One can make more than a million dollars with a college degree versus not having a college degree. One of the most common misconception that we have found students have is if the student is US citizen and the parent is undocumented that the student cannot apply for financial aid. The other misconception is that if that the parents are working the students are not going to be eligible to receive financial aid. So a lot of what we see sometimes, family that take out second mortgages and educational credit cards simply because they don’t even know that financial aid is possible. Number one, you have to be a degree-seeking student. Number two, you have to be a US resident or US Citizen. Number three, you have to be attending an eligible institution under the Title-4 program. The last thing is that you cannot be in default of any federal loan that you may have borrowed in the past.

So you have the Perkins loan program which is low cost low interest rate federal loan and those are institutional awarded. That program is not something that you can fill out application for that normally is awarded to the student by school. And then they have to fill out a truth and lending statement with the school so that’s normally a through the general financial aid application process we are talking about. There is what the what we call the FFELP or the Federal Family Education Loan Program. And then there is the Federal Direct Loan Program which is direct from the government. The federal loans students coming in the two categories. Those are subsidized Stafford and Unsubsidized Stafford. They run in two programs, the Federal direct program which are direct with the government and the government is giving the dollars and there’s the FFELP program which is what you know Sallie Mae works with which is the federal family educational loan program. Now the Stafford loan has subsidized Stafford and nonsubsidized Stafford. The Subsidized Stafford means that the government will basically pay the interest while the student is in school. The unsubsidized means that the student will be liable for the interest while they are in school. You can rest assure as an undergraduate student that over the next years, you will not pay any more than a fixed rate of 6.8% going down over the next five years or so.

Anything addition, any additional dollars that dependent student needs would come in the form of a parent class loan, that’s in the federal category and that, would mean that the parent would have to borrow on behalf of the child. The parent plus loan doesn’t have limit. Limit is the cost of education. And a private loan is something that depending on the company you’re borrowing from may have an income criteria, may have a debt/income ratio. Usually the federal loans have an interest rate that’s half. The private loans usually have an interest rate that’s higher than the prime rate. Signature loan doesn’t require a student have a specific income coming in. In other words, we understand that the student is not going to have an income because they are in school. 2futuro is one of those options that are available to college entering students and their parents as they decide which college financing option is available to them. And certainly through the help of the scholarships and grants that are available one can always look for opportunities that can really reach the objective and achieve the dream of a college education. Families and student needs to realize that the financial aid office is the number one source of information for them. It’s very important that the families, once they made a decision as to which institution their child’s going to go they must schedule an appointment with the financial aid office.