(LoanSafe Warning) Before you consider taking on a student loan to help pay for college, it's generally advised to try and get government grants, gifts, or other sources of free funds available.

However, if you determine you are not eligible to receive financial aid for school, and you can afford it, it is generally wise to go through federal student loans. But keep in mind there are alternative loans to help pay for college.

Before you do anything, first you should look into the costs of colleges you are interested in and compare the costs to help determine which school is most affordable. Community colleges are generally ,much cheaper than that of a university, and some states such as California has some of the cheapest community colleges in the country.

If you currently get denied for federal student funding for grants or other free sources of money, there are currently low-interest federal loans for students and parents who need a more flexible payment option. But do all of your research early, in today's slowing economy you never want to miss a deadline, when applying for loans, and especially when you get the loan

Get started with applying for FASFA. Applications are generally free, and you can apply online, or get a form from a schools campus.

Home - FAFSA on the Web-Federal Student Aid

If you are inquiring about your FAFSA, you must contact the Department of Education at 1-800-4-FED-AID

Federal Stafford Student Loans

This is one of the most typical federal student loans, and provides financial assistance to undergraduates and graduates who are looking for significant amounts of funds, and is not based off the students credit. An important thing to know about these types of loans is that their interest rates vary depending on if they are Subsidized or unsubsidized.

One of the upsides to these types of loans is that as long as the student doesn’t exceed yearly Stafford Loan borrowing limits, they may take out both subsidized and unsubsidized loans.

Subsidized

With subsidized Stafford student loans, the federal government pays the interest on the loan as long as you stay in school, so these loans will not have anything added on top of the loan value, and this type of loan you do not have to start repaying till after you graduate

Subsidized loans are available on the basis of financial need, which means that students who financially need the loans are probably going to get them over someone who doesn't need the financial aid as much. With this said, students should very carefully take in consideration whether they are dependent or independent students. Even if you're living on your own away from your parents financial help, the federal government could still see you as a dependent. There are strict federal guidelines that are followed without any exception.

The following questions are taken directly from the FASFA application, which determine whether or not you are dependent or independent:

  • Were you born before January 1, 1989?
  • At the beginning of the school year, will you be working on a master's or doctorate program (such as an MA, MBA, MD, JD, PhD, EdD, or graduate certificate, etc.)?
  • As of today, are you married? (Answer "Yes" if you are separated but not divorced.)
  • Do you have children who will receive more than half of their support from you during the academic year (July 1-June 30)?
  • Do you have dependents (other than your children or spouse) who live with you and who receive more than half of their support from you??
  • At anytime since you turned age 13, were both your parents deceased, were you in foster care or were you a dependent or ward of the court?
  • Are you, or were you an emancipated minor as determined by a court in your state of legal residence at the time you received the determination?
  • Are you, or were you in legal guardianship as determined by a court in your state of legal residence at the time you received the determination?
  • Has your high school or school district homeless liaison determined that you were an unaccompanied youth who was homeless?
  • Had the director of an emergency shelter or transitional housing program funded by the U.S. Department of Housing and Urban Development determined that you were an unaccompanied youth who was homeless?
  • Has a director of a runaway or homeless youth basic center or transitional living program determined that you were an unaccompanied youth who was homeless or were self-supporting and at risk of being homeless?
  • Are you currently serving on active duty in the U.S. Armed Forces for purposes other than training?
  • Are you a veteran of the U.S. Armed Forces?


If you answer yes to any of these questions, you can declare yourself as an independent when it comes to applying for these loans, otherwise, you need to use your parents financial information to apply for the loan.

subsidized Stafford student loan amounts are very limited, but can be obtained for graduates and undergraduates.

Unsubsidized

Interest is added onto this type of loan, however with these types of loans students do not have to start paying until they graduate. Students will have a six-month grace period after graduating, leaving school, or dropping below half-time status. After this time, payments must be made.

Also, Unsubsidized Stafford Loans are not based off of income, but the flip side is that not all students will be eligible for the maximum loan amount. The factors that determine the amount a student is eligible for are their previous school year, their additional financial aid awards and the estimated cost of attendance.

Stafford Loan Application

Stafford Loan Application Information Request | StaffordLoan.com

Stafford Loan limits are based on two factors: whether a student is considered a dependent of his parents and his year in school.

THIS YEARS UPDATE FROM Stafford Loan Information | StaffordLoan.com

Update: Stafford loan interest rates for 2012-2013 are currently unknown. The bill which lowered rates to 3.4% will expire July 1, 2012 and without action from congress, rates will double to 6.8%.

To be eligible for a Stafford Loan:

  • You must have submitted the FAFSA application (link provided above)
  • To be eligible for a subsidized loan, the school must approve your financial need
  • You must be at least a half time student


Dependent Students Annual Loan Limits

First Year $5,500 ($3,500 subsidized/$2,000 unsubsidized)

Second Year $6,500 ($4,500 subsidized/$2,000 unsubsidized)

Third Year and Beyond $7,500 ($5,500 subsidized/$2,000 unsubsidized)

Independent Students

Independent Students Annual Loan Limits

First Year $9,500 ($3,500 subsidized/$6,000 unsubsidized)

Second Year $10,500 ($4,500 subsidized/$6,000 unsubsidized)

Third Year and Beyond $12,500 ($5,500 subsidized/$7,000 unsubsidized)

Graduate or Professional $20,500 ($8,500 subsidized/$12,000 unsubsidized)

Lifetime Limits

Undergraduate Dependent $31,000 (Up to $23,000 may be subsidized)

Undergraduate Independent $57,500

Graduate or Professional $138,500 (Up to $65,000 may be subsidized) or $224,000 (for Health Professionals)