Federal and private school loans help pay for the cost of tuition and education expenses that grants and scholarships do not cover. There are many types of federal student loans, including student consolidation loans, some of which are available only to financially needy families. To apply for a federal student loan, parents and students must complete the FAFSA. Information submitted on the FAFSA determines eligibility for a Pell grant, as well as for federal student loans. Once the Department of Education processes the FAFSA, parents may then use the information to apply for a school loan through the federal government.
Private student loans can act as an alternative or a supplement to federal school loans. Either parents or students may apply for school loans through a private lending institution. Private loans have varying interest rates that depend on an applicant’s credit score and whether or not he or she has a co-signer for the loan.
Unlike federal direct loans that have fixed interest rates, many private loans have variable interest rates. Some students may secure interest rates that are lower than fixed federal rates, although variable rates are subject to increase in the future. Applying for a private school loan is less complicated than federal student loans, in that applicants do not have to complete the FAFSA, nor do they have to wait out lengthy processing times. Although it is preferable that students and parents secure funding for school plenty of time before tuition becomes due, applicants may apply for private school loans at any time.
Following college, students are often left with multiple student loans requiring more than one student loan payment every month. By combining those loans into a consolidation loan, students can make a single monthly payment and may be able to lower the amount of their monthly payment obligations. Federal direct consolidation loans are available through the U.S. Department of Education, and private consolidation loans are available through banks and lending institutions as well.