Did you find your ideal university, but it is out of your price range? Look for a student loan and fulfill your dream, but which one should you choose?
Federal or private
On the one hand, private loans are more complex to obtain since they depend on your credit history. You will also need a co-signer who will assume the risk in case of missed payments.
On the other hand, you do not need a credit check to qualify for federal loans. Another aspect to consider is that private loans have higher interest rates, being 3.73% the average fixed rate of federal loans compared to privates that can go up to 12.99% fixed. Federal loans have different options for deferral or forbearance that could pause payments, compared to private ones that hardly participate in forgiveness programs. In other words, federal loans are friendlier with your financial health.
When it comes to federal loans, there are two roads. Subsidized loans are specially for undergraduate students who demonstrate financial need and need to cover their higher education expenses. Unsubsidized loans are eligible for all students, and there is no need to prove financial need.
As for the process, you will have to fill out FAFSA (Federal Free for Federal Student Aid). With this form, you will be able to know how much money you could access. The school you apply to will determine what type of loan and the amount you will receive each academic year.
The application process for a private loan is independent of each bank or lender. When you are in the process of shopping for a loan, prioritize interest rates, as well forbearance options or any flexible clause that will give you the security to take it out.
When seeking financial aid for your studies, evaluate your profile in terms of the type of student you are and your credit status. Although federal loans give you better loan terms, they are not eligible for everyone.