Crash Course in Financial Aid for a Newbie | 08.31.10

Posted in Financial Aid, Stafford Loan, Student Loans By Student Loan Network Staff

My mission: In one month, learn everything there is to know about the financial aid process, and federal student aid programs so that I can get a jump start on my applications.

Armed with: ejacobs (Student Advocate from, a variety of web resources that I found from the Student Loan Network, some books and packets, federal student aid guides, the web-o-sphere, and my peers.

Reason: I’d like to go back to school, but I’m not swimming in cash. I recently read that incoming students often underestimate how much financial aid they will get from the government and fail to take advantage of it. I’m determined to find the maximum amount of aid possible for my situation.

There are a variety of online resources I found helpful in the start of my learning process, and I will share some of them with you below.

The first thing I needed to do was make a distinction between the two primary types of loans, a federal student loan and a private student loan. The most common type of federal student loan is a Stafford loan which is available to students as a supplement to their personal resources and is based on need. These loans generally have a low fixed interest rate, have flexible income-based repayment options, and are not based on credit. Private student loans, also referred to as Alternative Education Loans, are credit-based funds that a student can use as a secondary form of aid to bridge the gap between what the government provides and what he or she needs. These loans can have variable interest rates, which tend to be higher than federal student loans but lower than credit card interest rates.

A Stafford loan is primarily for tuition and on campus housing, whereas private student loans might be put toward books, supplies, other housing and even transportation. I was surprised to discover that nearly all students are eligible to receive federal loans regardless of credit, which makes the Stafford loan the best place to start. When I looked further into Stafford loans, I discovered that there are two kinds: subsidized and unsubsidized. With a subsidized loan, interest does not accrue (for you) while in school or during the grace period afterward, but there are maximum amounts one can borrow. Interest does accrue on an unsubsidized Stafford loan, though the payments of interests can also be deferred until later. To qualify for a subsidized Stafford loan, one must show a significant amount of financial need. The best way to find out which one you’ll get, is simply to apply.

That process begins with the FAFSA (Free Application for Federal Student Aid). Completing my FAFSA will not only pave the way for my federal loan application, but also will allow me to apply for additional state and institutional aid! But that’s for another day.

Have more questions? I did. For further information on the types of loans, check out these brief overviews:

Stafford loan information/FAQ
Unsubsidized Stafford loan vs. Subsidized
Private student loan overview

If you have further questions, go ask the community at!

Next step, the one and only, FAFSA Application.

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One Response to “Crash Course in Financial Aid for a Newbie”

  1. Michael Kartel says on September 6, 2010 at 2:21 am:

    It's a good article. It tells that there are 2 types of student loans as federal student loan and private student loan.

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