How to Apply for Federal Student Loans & Grants
Whether this is your first or last year of paying for college, you may have questions about how to get affordable financial assistance. The Committee has been working on measures to help American families afford higher education -- answers to some frequently asked questions are below.
Why max out on federal loans before taking out a private loan?
Thanks to the College Cost Reduction and Access Act, which was signed into law in September 2007, federal interest rates on subsidized federal Stafford Loans for undergraduates will drop to 4.5% on July 1, 2010 from the previous rate of 5.6%. All Stafford Loans made to graduate students and unsubsidized Stafford Loans made to both undergraduate and graduate students will carry a fixed 6.8% interest rate. Both federal loan interest rates provide far greater savings over more expensive private loans, whose interest rates can run as high as 19%. Another reason to choose federal loans over private loans is that private loans often have variable rates that can result in an unexpectedly high monthly payments. In contrast, federal loans will stay fixed at the same low rate over the life of the loan.
Rates on subsidized federal Stafford Loans drop to 3.4% for loans disbursed on or after July 1, 2011.
What kind of aid can the federal government provide?
Aside from federal work-study programs (which the American Recovery and Reinvestment Act put $200 million into to create opportunities for an additional 133,000 students to get paid for work in a field related to either their major or community service), the federal government offers grants and loans to students and their parents.
Grants (Financial aid that is not repaid.)
- TEACH Grants: These grants, which were newly created by the College Cost Reduction and Access Act, provide upfront tuition assistance to qualified undergraduate students who commit to teaching in public schools in high-poverty communities and high-need subject areas. Undergraduate recipients may receive $4,000 a year, with a maximum of $16,000 over four years. (Graduate recipients may receive a maximum of $8,000 over two years.) These grants first went into effect for the 2008-2009 school year.
- Pell Grants: Pell Grants are awarded usually only to undergraduate students who have not earned a bachelor's or a professional degree. Due to funding provided by the College Cost Reduction and Access Act, the American Recovery and Reinvestment Act and the Student Aid and Fiscal Responsibility Act, the maximum Pell Grant scholarship for the 2010-2011 school year will be $5,550 – $200 above last year’s award. At this level, the Pell Grant will be able to cover a year of tuition at most public universities and community colleges.
- Other grants
Loans (Financial aid that must be repaid with interest.)
Subsidized Stafford Loans' interest rates will drop to 4.5% on July 1, 2010 for loans made to undergraduate borrowers, thanks to the College Cost Reduction and Access Act. A subsidized loan is awarded on the basis of financial need. If you're eligible for a subsidized loan, the government will pay (subsidize) the interest on your loan while you're in school, for the first six months after you leave school, and if you qualify to have your payments deferred.
Unsubsidized Stafford Loans carry a rate of 6.8% for undergraduate borrowers. Unlike a subsidized loan, you are responsible for the interest from the time the unsubsidized loan is disbursed until it's paid in full. You can choose to pay the interest or allow it to accrue (accumulate) and be capitalized (added to the principal amount of your loan). Capitalizing the interest will increase the amount you have to repay.
- Loan Forgiveness for Public Service Workers: Recent surveys also show students’ interest in public service jobs is surging. Graduates who enter into public service careers, such as teachers, public defenders and prosecutors, firefighters, nurses, non-profit workers and more, will be eligible for complete loan forgiveness after 10 consecutive years of public service and loan payments. (This program began on October 1, 2007.)
- Income-Based Repayment Program: On July 1, 2009, a new Income-Based Repayment program went into effect, capping borrowers’ monthly loan payments at just 15 percent of their discretionary incomes (15 percent of what a borrower earns above 150 percent of the poverty level for their family size). After 25 years in the program, borrowers’ debts will be completely forgiven. Thanks to the Student Aid and Fiscal Responsibility Act, starting in 2014, this goes down to 10% of discretionary income, with balances forgiven after 20 years. Any current or future borrower with federal student loans is eligible.More information on IBR »
How do I apply?
To get federal student aid, you'll need to fill out a Free Application for Federal Student Aid (FAFSA) form. The FAFSA is also used to apply for aid from your state or school. To apply, you'll need your Social Security Number, driver’s license, income tax returns, bank statements, and investment records. (Congress passed the Higher Education Opportunity Act to simplify this process: the bill, which passed the House on July 31, 2008 and was signed into law on August 14, 2008, includes provisions to simplify the FAFSA.)
When must I apply?
You may submit your FAFSA as early as January 1 of each year. It's best to file early since deadlines may vary for state, school and private aid. Be sure to check with your state, school, and lenders for their individual deadlines.
Other information: Applying for scholarships
Additional resources about scholarships, including general information, a scholarship checklist and a free scholarship search service, are available at Student Aid on the Web.
What else is the Committee doing to help make college more affordable?
In addition to getting the College Cost Reduction and Access Act signed into law, providing the single largest increase in college aid since the GI bill at no new cost to taxpayers, the Committee worked on theEnsuring Continued Access to Student Loans Act of 2008, which was signed into law on May 7, 2008. This measure provides new protections, in addition to those in current law, to ensure that families can continue to access the loans they need to pay for college.
The Higher Education Opportunity Act, which was signed into law on August 14, 2008, makes textbook costs more manageable, provides students with more information about their borrowing options and expected college costs, and restores integrity and accountability to the student loan programs, in addition to simplifying the FAFSA.
In 2009, the American Recovery and Reinvestment Act was also signed into law to help college students and families pay for college by significantly boosting federal student aid, including increasing Pell Grants, expanding work-study and service opportunities for students, and stabilizing state budgets for higher education.
The Student Aid and Fiscal Responsibility Act, which was signed into law in March 2010 as part of the health care reconciliation bill, will help reach President Obama's goal of producing the most college graduates by 2020 by making college dramatically more affordable – at no cost to taxpayers. Specifically, it: invests the law’s savings to make college affordable and help more Americans graduate; provides reliable, affordable, high-quality Federal student loans for all families; and reduces the deficit by at least $10 billion over 10 years.