Though its possible to get private student loan with low interest rate but still best choice is federal student loans. There is no doubt about that lower interest rate student loan is more beneficial because lower interest rate means lower payments and shortened repayment period and more money in your pocket.

Another beneficial aspect of low interest student loans is the subsidized federal student loans. If you get a Stafford Loan or Perkins Loan then government will pay the interest while you are in school and even up to nine months after you graduate.

Two Major Types of Low Interest Loans

The major type of Low Interest Student Loan is a federal, now we will look which types of federal student loans offer extremely low interest rates and other benefits to students.

Stafford Student Loan

Stafford Student Loan is a low interest rate student loan that allows the students with to no credit to afford college. As federal student loan Stafford Loan has different requirements than standard lender like bank. This loan is not based on your credit score; it is based on whether or not you fall within the eligible income bracket. In its basic requirements is that you will attend school at last half time and if you have never defaulted on a loan before.

There is a limit of interest rate on Stafford loan that how high it can be. Currently interest rate on that is 8.2% though most people get a rate that is lower than this. The main benefit on Stafford Student Loans is that it’s subsidized, meaning that the government will foot the bill for the interest that accrues while you are in school. Stafford Loans are also available unsubsidized but the low interest rate still applies.

Perkins Student Loan

Perkins Loans is another form of federal loans that provide many options to borrowers. But to qualify for this loan you have to show exceptional need. Most that qualify Perkins Loan also qualify for Federal Pell Grant, which is another form of financial aid with requirement of exceptional need. If you will qualify for this loan then you will see that it is subsidized as well. Perkins loans also have the largest grace period than all other loans that mean you will get enough to find a better job after your graduation and then you can easily payback.

The interest rate is 5%, which is lower than all that you will find anywhere. It’s almost impossible to get such lowest interest on a bank loan. That’s why federal student loans are the true interest loans. There is no other type of loan that can have such lowest interest rates than federal loans.

How to Take Advantage of These Low Rates

The path to financial aid starts with FAFSA. If you are going to get any grant, aid or any type of federal loan then it’s necessary for you to complete and FAFSA and submit it by March 2 of the year. After processing of your FAFSA, you will get a Student Aid Report (SAR), that will outline that how much money you are expected to contribute to your education financially. Then after few weeks you will get award letter through mail in which it will be indicated that what types of financial aid you have qualified for and how much money you can or will receive. You will have to return this award letter indicating that what financial aid you are accepting.

After that follow the specific instructions for securing the type of low interest loan you’ve been awarded. For Stafford Loan a promissory note is required to be submitted while for Perkins Loan requires you to fill out paperwork and submit it directly to your school, as your college of choice will be the lender.

Aside from the type of loan you will get, just always note the interest rate. Though you will be new in the world of finances and credit, lenders expect you to make responsible and informed decisions. For low interest loans always keep your knowledge up to date so that you can choose best from them.

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