Is FAFSA a loan?
In short, no
The FAFSA, or the Free Application for Federal Student Aid, is not a loan. Like the name states, it is merely an application that you fill out in order to determine your eligibility for receiving a federal loan. It is free to fill out this application and submit it to the federal student aid office of the U.S. Department of Education. There are no fees of any kind for the application to get processed. Once the application is finished being reviewed, then you are introduced to a number of different types of federal loans and financial aid programs that you are eligible for. From there you can review each type of loan and determine the best one for your particular academic expenses. So remember, the FAFSA is not a loan itself. It is merely the link that connects you to the loan. If your school does not participate in the FAFSA then you won’t be able to get a federal loan to pay for your educational expenses for that school.
Most students who meet the need-based requirements of the FAFSA will be eligible for a federal direct subsidized loan. This is a loan where the federal government pays your interest as long as you continue to attend school. They will even pay your interest for six months after you graduate. However, this loan is only available to undergraduate students. If you are a graduate student then you may be eligible for the Federal Perkins Loan, although it is not available in every school. This type of loan can be given to both undergraduates and graduates. The only downside is that the interest is not subsidized, so you will incur the added interest costs while you are a student. All of these loans have a fixed interest rate that is usually between 4% and 5%.
It doesn’t end with the FAFSA
Now even if you get approved for some financial aid, it doesn’t mean it will be enough to pay for all your educational expenses. If you have submitted your FAFSA and the federal student aid office determines that you won’t get enough in grants, scholarships or loans, then you should consider a federal work study program. This is where a student gets a job at the school and the federal government pays 50% of their earned wages. These wages then apply towards their remaining educational expenses that were not paid for by the financial aid they received.