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Are you interested in advancing your career? Then you should consider increasing your education! believes in education and encourages stay at home moms to move from Cradle to Career by working toward a degree online while their children are young. Our Education for Moms section offers information on everything you need to know to make your education possible.

Benefits from Applying for Federal Financial Aid

Finding finance to fulfill their educational goals is a major problem for many people including stay at home moms who are not employed due to family commitments. However you should never let obstacles prevent yourself from achieving what you dream for. First try to obtain a scholarship or a grant because you do not have to repay the money you get from these two methods. If you are unsuccessful the next step is to get a loan.

You have two alternatives to obtain a student loan. One is to go for federal aid and the other option is to obtain a private loan. The federal loans come in the form of Stafford loans (subsidized or unsubsidized), Perkins loans and Federal Plus loans. On the contrary there are so many private loans schemes offered by various private financial institutions. Let us now consider benefits of applying for federal financial aid over private channels.

Federal aid is cheaper

This is the biggest advantage of obtaining federal financial aid over private loans. The federal interest rates can be even 5% less than some private loans. Of course you are not talking about borrowing $100 dollars. For instance it is expected to cost you around $70,000 annually for an MBA from the Harvard University. As a result a difference of 5% can be significant. Adding salt to the wound many private loan schemes have variable interest rates while federal loans generally come with fixed interest. As a result if you go for federal loans, you end up paying less during high interest rate periods. 

Only option for people with low credit rating

Provision of private loans is solely based on a person’s credit rating. This means if you have a lower credit rating the chances of you getting a loan are remote. Even if you succeed you may have to pay exorbitant interest rates. Ultimately federal aid becomes the only option available to people with low credit rating.

Flexible repayment

Federal loans offer a grace period of usually six months after graduation. There is also room for negotiation regarding further deferments or even cancellation of loan under extreme circumstances such as financial distress or severe economic hardships. On the other hand a private loan institute will never discharge you from your loan obligation until you pay it full. In addition there are strict regulations governing deferments of payments and as a result there is less flexibility in private loans.   

However the amount received via a federal loan is limited and often becomes insufficient to entirely finance the education costs. If this is the case, obtaining a private loan to finance the balance could be the only option available to you. Further whether you would receive aid or not will totally depend on the Expected Family Contribution (EFC) calculated as per the FASFA. In other words the federal loans are need based which means the applicants should prove acceptable level of financial need to receive them. In addition the money received through federal aid can be used only for to finance tuition, housing and books where as there is no such control for private loans.

All in all, federal financial aids are considered far more superior than private loans. Therefore a person looking for student loan should first aim to obtain a federal loan. In case you failed or the money you received from federal aid is sufficient, you should consider taking a private loan.   

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