When you apply for a student loan, several factors are taken into account to calculate the amount you can receive. One of the key factors for federal and private loans is the “cost of attendance” at the institution where you are registered or plan to register.
Funds are usually paid to the school first to cover tuition and all other school-related costs. Once this amount is subtracted, the rest is returned to the student borrower to cover other expenses. from books and materials to transportation and accommodation.
How is the amount of your student loan determined?
Private loans vary depending on the lender and the type of student loan you apply for. Some lenders will allow you to borrow the full cost of your education based on your credit score, degree listed, and whether you have a co-signer. However, the amount may be capped to cover the cost of participation minus any other financial assistance you receive. Although private loans may offer more flexibility, they have several disadvantages and lack the protections afforded by federal loans.
When you apply for federal student aid, your school’s financial aid office will determine the amount of financial aid you are eligible for. Eligibility to receive a federal student loan “depends on your expected family contribution, your year in school, your enrollment status, and the cost of attending the school you will attend.” according to the Ministry of Education.
The financial aid staff will use a formula to calculate the amount of need-based aid you may receive. This is determined by looking at the cost of attending school and then subtracting your expected family contribution.
The amount of financial assistance that those who apply for assistance but do not need it can receive is determined using the cost of participation less any financial aid already given, which includes aid from all sources, such as need-based aid and private scholarships, among others.
What expenses can funds from student loans be used to pay?
When determining the cost of participation, financial aid staff consider several factors, including tuition and fees, books, supplies, equipment, transportation, and miscellaneous personal expenses, as well as room and board in on-campus school accommodation or rent for off-campus accommodation. Additionally, other factors such as special needs disability, child care or other dependent care costs are included. Even “reasonable costs for eligible study abroad programs” are considered.
Federal student loans are decided for the entire academic year and must be renewed each year. The sooner you know where you are going to live will help you determine how much money you will need to cover your school attendance costs.
Once you have obtained a federal student loan, you should know that the funds are disbursed in at least two periodic packages. You will need to calculate your monthly budget to avoid needing additional financial assistance through private loans which may have higher interest rates and do not provide most of the benefits of federal loans.
How to Apply for a Federal Student Loan
In order to get the ball rolling, you will need to complete the Free Application for Federal Student Aid (FAFSA) form as soon as possible during the previous academic year. When you have committed to attending college, you will want to submit your FAFSA as soon as possible to allow the federal government to review your case. FAFSA forms are available on October 1 each year and you will need to submit them by your state’s deadline.
In addition to calculating the school’s financial aid staff, the Ministry of Education will need to know your parents’ economic situation and your status as a dependent. If you need help filling out the form, the government’s Federal Student Aid website provides a guide.