You can use the FAFSA Quiz to find out how much your total loan cost will be. This includes both the interest and the principal amount. You can also use the FAFSA Quiz to see if you qualify for any grants or scholarships that can help reduce your total loan cost.
Checkout this video:
The easiest way to reduce your total loan cost is to understand the FAFSA form and utilize the resources available to you. This FAFSA quiz will test your knowledge so that you can be on your way to getting the most out of your financial aid package.
How to Lower the Total Cost of Your Loan
Most students and their families choose the loan with the lowest interest rate. But the interest rate is only part of the picture. The other factor is the total cost of the loan. The cost of a loan is the interest rate PLUS all the other fees charged by the lender. So, if you want to reduce the total cost of your loan, you should look for a loan with a low interest rate AND low fees.
As indicated by their name, federal student loans are provided by the federal government. The interest rates on federal student loans are set by the government and tend to be lower than the rates for private student loans. In addition, repayment on federal student loans may be eligible for certain repayment plans that offer forgiveness after 20 or 25 years. For these reasons, federal student loans should always be your first choice when taking out loans for college.
There are two main types of federal student loans: direct subsidized loans and direct unsubsidized loans. Direct subsidized loans are available to undergraduate students with financial need as determined by the Free Application for Federal Student Aid (FAFSA). The interest on direct subsidized loans is paid by the government while you’re in school and during your grace period. Direct unsubsidized loans are available to both undergraduate and graduate students; there is no requirement to demonstrate financial need. The interest on direct unsubsidized loans accrues while you’re in school and during your grace period; however, you can choose to pay the interest while you’re in school or allow it to accrue and be capitalized (added to your principal balance), which will increase the amount you have to repay.
There are two types of student loans: federal and private. Private loans are not guaranteed or backed by the federal government, which means they tend to have higher interest rates and may require a cosigner. You should always exhaust your federal loan options before taking out a private loan.
If you decide to take out a private loan, there are some things you can do to lower the total cost of your loan:
-Shop around for the best interest rate. Interest rates on private loans can vary greatly, so it’s important to shop around and compare offers before you decide on a lender.
-Get a cosigner with good credit. If you can find a cosigner with good credit, you may be able to get a lower interest rate on your loan.
-Choose a shorter repayment term. The longer you take to repay your loan, the more interest you will accrue, so choosing a shorter repayment term can save you money in the long run.
-Make extra payments. If you can afford to make extra payments on your loan, you will accrue less interest and will be able to pay off your loan more quickly.
Completing the FAFSA is the first step to receiving federal financial aid for college, career school, or graduate school. Based on the information you provide on your FAFSA form, your school will send you a financial aid offer, which may include federal grants, loans, and work-study jobs. You may also be eligible for state and school aid.
What is FAFSA?
The FAFSA, or Free Application for Federal Student Aid, is the form that you fill out to apply for federal student aid. This includes grants, loans, and work-study. You will need to fill out the FAFSA every year that you are in school in order to continue receiving aid.
The FAFSA becomes available on October 1st each year. You will want to fill it out as soon after October 1st as possible because some schools have limited funding and they give out aid on a first-come, first-served basis. You will also want to make sure you have time to meet your state’s deadline.
You can fill out the FAFSA online at fafsa.gov. You will need to create an account and then you will be able to fill out the form and submit it. Make sure you keep your login information somewhere safe so that you can access it again next year.
You will need some basic information in order to fill out the FAFSA, including your Social Security number, driver’s license number (if you have one), tax information, and financial information. You will also need the school code for each school you are applying to so that your FAFSA can be sent there.
You should receive a response from the Department of Education within a few weeks telling you how much aid you are eligible for. Once you receive this, you will want to accept or decline the aid that is offered to you. If you accept the aid, it will be sent directly to your school where it will be applied to your tuition bill or given to you in the form of a check (for work-study or grants). If you have any questions about filling out the FAFSA or about your financial aid award, you can contact your school’s financial aid office or the Department of Education at 1-800-4-FED-AID (1-800-433-3243).
How to Complete the FAFSA
FAFSA stands for Free Application for Federal Student Aid. It’s a form that you fill out online (or on paper) to apply for financial aid for college or career school.
The FAFSA form becomes available each year on October 1. You’ll want to fill it out as soon after October 1 as possible because some types of aid are awarded on a first-come, first-served basis.
To complete the FAFSA form, you (and your parents, if you’re a dependent student) will need:
– Your Social Security number
– Your driver’s license number (if any)
– Your Alien Registration Number (if you are not a U.S. citizen)
– Your most recent federal tax returns, W-2s, and other records of money earned. (Note: You may be able to transfer your federal tax return information into your FAFSA form.)
– Bank statements and records of investments (if any)
– Records of untaxed income (if any)
– An FSA ID to sign electronically
Private loans generally have higher interest rates and fees than federal loans. If you have the option to take out a federal loan instead of a private loan, you should do so. Consider the following when you compare federal and private loans:
What is the Total Cost of Your Loan?
To find the total cost of your loan, you need to know three things: the principal, the interest rate, and the term.
The principal is the amount of money that you borrowed. The interest rate is the percentage of that amount that you will pay in interest over the life of the loan. The term is the length of time that you have to repay the loan.
Assuming that you borrowed $10,000 at an interest rate of 6% for a five-year term, your total loan cost would be $12,143. This includes $10,000 in principal and $2,143 in interest.
If you extended your loan to a ten-year term, your total loan cost would be $14,734. This includes $10,000 in principal and $4,734 in interest.
You can see that the longer you take to repay your loan, the more interest you will pay and the higher your total loan cost will be. You can minimize your total loan cost by repaying your loan as quickly as possible.
How Much Can You Borrow?
The Federal Direct Stafford Loan program is the largest source of student loans. Most schools participate in this program, which means you can usually borrow from it regardless of where you go to school.
There are two types of Stafford Loans: subsidized and unsubsidized. Subsidized Stafford Loans are for students with demonstrated financial need, as determined by the FAFSA. The federal government pays the interest on these loans while you’re in school and during certain periods of deferment. You don’t have to begin repaying your loan until six months after you leave school.
Unsubsidized Stafford Loans are not based on financial need; therefore, you are responsible for the interest from the time the loan is disbursed until it is paid in full. You can choose to pay the interest while you’re in school or allow it to accrue and be added to the principal balance of your loan (capitalization). If you choose not to pay the interest while you’re in school, your loan will have a higher principal balance when repayment begins because accruing interest will be added to your loan balance.
What is the Interest Rate on Your Loan?
The interest rate on your loan is the amount of money you will be required to pay back in addition to the principal (the amount you borrowed). The interest rate depends on several factors, including the type of loan, the lender, the current market conditions, and your credit score. It is important to understand how your interest rate affects your monthly payment and the total cost of your loan.
Here are some things to consider:
-The lower the interest rate, the lower your monthly payment and the total cost of your loan.
-If you have a fixed interest rate, your monthly payment and total cost of your loan will not change over the life of the loan.
-If you have an adjustable interest rate, your monthly payment and total cost of your loan could change if market conditions cause interest rates to rise or fall.
-If you have a private student loan with a variable interest rate, your monthly payment and total cost of your loan will depend on the current market conditions when you make your repayment.
What is the Loan Term?
The amount of time you have to repay your loan is called the “loan term.” The average federal student loan has a 10-year loan term, but terms can range from 5 to 20 years, depending on the type of loan. Loan terms for private student loans also varied, and can be shorter or longer than 10 years. Longer loan terms usually mean lower monthly payments, but they also mean that you’ll pay more in interest over the life of the loan.
Here are your results:
You could reduce your total loan cost by:
-Applying for scholarships and grants
-Working part-time or full-time while in school
-Choosing a less expensive school
-Living at home or with roommates to save on housing costs
-Eliminating unnecessary expenses