Lana Oconnell
The Free Application for Federal Student Aid (FAFSA) is used to determine eligibility for grants, scholarships, work-study programs, and federal student loans for college or career school. FAFSA is free to complete and submit, and it is recommended to do so as soon as possible. It is not necessary to take out a student loan to pay for FAFSA, as there are other options available to help cover the cost of school, such as scholarships, grants, work-study programs, and federal student loans. However, if you are considering taking out a student loan, it is important to understand the differences between federal and private loans, as federal loans provide benefits that are not typically available with private loans, such as lower interest rates and fees.
| Characteristics | Values |
|---|---|
| Should I take out a student loan to pay FAFSA? | FAFSA is free to apply for and gives access to the largest source of financial aid for school. It is recommended to apply for FAFSA first and then consider taking out a student loan. |
| FAFSA application requirements | Basic eligibility requirements include financial need. Deadlines for the 2024-25 school year are June 30, 2025, and for the 2025-26 school year, the deadline is June 30, 2026. |
| Benefits of federal student loans | Federal student loans provide benefits not typically available with private loans. These include not requiring a co-signer, lower fees, and lower interest rates. |
| Private student loans | Private student loans usually require a co-signer and may have higher fees and interest rates. |
| Other options | Tuition payment plans, scholarships, work-study programs, and grants are other options to consider before taking out a student loan. |
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What You'll Learn
Pros and cons of federal student loans
Federal student loans can provide a great opportunity for many students to fund their college of choice. However, they might not be the best fit for everyone. Here are some pros and cons of federal student loans to help you decide if taking out a student loan to pay FAFSA is the right choice for you.
Pros of Federal Student Loans
- Federal student loans are easy to obtain for college students with limited credit or no credit history at all as they do not require a credit check when you apply.
- They provide many benefits that aren't typically available with private student loans. For example, federal student loans usually do not require a cosigner, whereas most private student loan companies do.
- They can help you bridge the gap and cover some of your major expenses so you don't have to worry as much about coming up with the full cost of attendance on your own.
- Borrowing money can help you build credit. Building your credit score is an important factor in many purchases, including a house mortgage, insurance, car loans, and more.
Cons of Federal Student Loans
- You will experience post-college debt when taking out a student loan.
- Most federal student loans have an annual limit for how much you can borrow, and you may need to look for other sources of income to complete your degree.
- Missing payments on student loans will result in penalties, including added interest, higher fees, or even wage garnishment, which will also negatively affect your credit score.
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Private student loans
If federal student aid is not enough to cover your expenses, you may want to consider taking out private student loans. Some private financial institutions, such as banks or credit unions, offer education loans that don't require a FAFSA form. However, it's important to understand the differences between federal and private student loans before borrowing from a private lender.
Federal student loans provide benefits that are typically not available with private loans. Private loans usually require a cosigner and may have higher fees or interest rates, depending on your credit score. It is recommended to compare offers from different companies and carefully review the loan contract, including penalties, interest rates, fees, repayment terms, and creditworthiness requirements. Meeting with a representative from your school's financial aid office can help you make an informed decision.
Before resorting to private student loans, consider other options to bridge the financial gap. You can explore tuition payment plans offered by your school's billing office, which can help spread out the costs over several payments throughout a semester. Additionally, you can request additional federal student loans or apply for scholarships based on your grades, skills, or abilities. Scholarships don't have to be repaid and can provide significant financial assistance.
If you decide to pursue private student loans, it's essential to shop around for the best rates and terms. Compare interest rates, repayment options, and borrower protections offered by different lenders. Private student loans may have variable or fixed interest rates, and understanding the potential impact on your future financial obligations is crucial. Remember that private loans may have stricter credit requirements, and a cosigner with a good credit history can improve your chances of approval and potentially secure better terms.
While private student loans can provide additional funding for your education, it's important to borrow responsibly and only take out what you need. Understand the repayment terms and create a budget that allows you to manage your debt effectively. Remember that taking out any loan is a significant financial decision that should be approached with caution and thorough research.
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Payment plans
If you didn't receive enough financial aid, there are several options to consider. Firstly, understand how financial aid is calculated and how schools use the information provided on the FAFSA form to create an aid offer. The financial aid office at your educational institution can help clarify this and suggest ways to fill any financial gaps.
One option is to ask about tuition payment plans. A payment plan can help you spread the cost over several payments throughout a semester, aiding your budgeting and helping you to avoid late fees. Your school's billing office, also known as the bursar's, cashier's, or student accounts office, can provide more information on the availability of payment plans.
If you've explored all other options and still need additional funds, you can consider borrowing more federal student loans. If you're a dependent student, your parent can apply for a Direct PLUS Loan, or if they're unable to secure this loan, you may be eligible for additional unsubsidized student loans of up to $5,000, depending on your grade level.
Before taking out any loans, it's important to understand the terms and conditions, including penalties, interest rates, fees, and repayment requirements. Federal student loans offer benefits typically not available with private loans, which may have higher fees or interest rates and usually require a co-signer.
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Parent Plus loans
To be eligible for a Parent PLUS loan, you must be the biological or adoptive parent (or, in some cases, the stepparent) of a dependent undergraduate student enrolled at least half-time at an eligible school. You must also not have an adverse credit history (unless you meet certain additional requirements).
The interest rate for Parent PLUS loans disbursed between July 1, 2025, and June 30, 2026, is 8.94%—this rate is fixed for the life of the loan. There is also a loan fee on all Direct PLUS Loans, which for loans disbursed on or after October 1, 2020, is 4.228%. This fee is deducted from each loan disbursement.
To apply for a Parent PLUS loan, you must first fill out the Free Application for Federal Student Aid (FAFSA) form. You can then apply online, although some schools may have different application processes. The US Department of Education will perform a credit check to determine your eligibility. If your credit needs improvement, you may still be able to get a Parent PLUS loan by adding an endorser or providing documentation of extenuating circumstances.
It is important to note that the parent borrower is legally responsible for repaying the loan. You may cancel all or part of your loan before or after it is disbursed under certain conditions. Under certain conditions, you may also be eligible to have all or part of your loan forgiven, cancelled, or discharged.
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Scholarships
The Free Application for Federal Student Aid (FAFSA) is a great place to start when looking for scholarships. By completing and submitting the FAFSA, you can learn about your eligibility for grants, scholarships, work-study programs, and loans. It is free to apply for FAFSA and gives you access to the largest source of financial aid for school. States and colleges also use FAFSA information to award their own financial aid packages, so it is important to submit your application on time.
Your school's financial aid office is another excellent resource to help you understand and explore scholarship opportunities. They can provide guidance and information about the specific scholarships that may be a good fit for you. It is worth noting that even after submitting your FAFSA form and receiving your initial aid offer, you can still reach out to the financial aid office to discuss any adjustments or additional options if you didn't receive enough financial aid.
In addition to FAFSA and your school's resources, there are other avenues to explore when seeking scholarships. You can research and apply for scholarships independently, and many organisations, foundations, or private institutions offer scholarships based on various criteria. These could include academic merit, financial need, community involvement, or specific skills and talents. It is worth investing time in thoroughly researching and preparing your applications to maximise your chances of success.
While scholarships are a great option, it's important to remember that they may not always cover the full cost of your education. In such cases, you may need to consider other options, such as student loans, work-study programs, or payment plans offered by your school to help manage the remaining costs.
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Frequently asked questions
FAFSA stands for Free Application for Federal Student Aid. It is used to determine eligibility for grants, scholarships, work-study programs, and loans for college or career school.
The application for FAFSA is free. You can create an account and obtain a Federal Student Aid (FSA) ID to sign and submit your first FAFSA form.
FAFSA is an application for federal loans, so you have already applied for a loan by filling out the FAFSA form. If you did not receive enough financial aid, you can request additional federal student loans or research private or alternative loans.
You can ask about tuition payment plans to help spread out the cost over several payments throughout a semester. You can also search for scholarships or grants that you may be eligible for.
