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June 22, 2023

Student Loans 101: Understanding the Basics

Embarking on a journey towards higher education is an exciting and transformative experience for any adult. However, the financial aspect can often be overwhelming, especially when it comes to student loans. That’s why Citizens First Bank offers this guide to understanding different loan types, and essential instructions for completing the Free Application for Federal Student Aid (FAFSA) to help you navigate the process smoothly.

About Student Loans

Understanding student loans begins with recognizing the different types available, such as federal student loans, private student loans, and parent loans. Federal student loans are often the first choice due to their lower interest rates and flexible repayment options. Private student loans, on the other hand, can bridge the gap when federal aid falls short. Parent loans provide parents with the opportunity to support their children’s education, but can come with high rates. It’s important to thoroughly assess all the terms and conditions, interest rates, and repayment options of each loan type to determine the best fit for your unique situation.

Loan Types:

  1. Federal Student Loans: These loans are provided by the government and generally offer more favorable terms and lower interest rates than private loans. They include Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans.
  2. Private Student Loans: Offered by banks, credit unions, and other financial institutions, private student loans are an alternative when federal loans don’t cover the full cost of education. They usually have higher interest rates and may require a cosigner.
  3. Parent Loans: Parents or legal guardians can apply for federal Parent PLUS loans or private loans to help their children finance their education. These loans are solely in the parent’s name and come with specific eligibility requirements.

Subsidized VS. Unsubsidized

When it comes to federal student loans, understanding the difference between subsidized and unsubsidized loans is essential. Subsidized student loans are a favorable option for students with financial need. The government covers the interest that accrues on these loans while the borrower is in school, during the grace period, and in deferment. This means that the loan balance remains unchanged until repayment begins, helping to alleviate the financial burden during the early stages of a student’s career.

On the other hand, unsubsidized student loans are available to both students with and without financial need. Unlike subsidized loans, interest starts accruing on unsubsidized loans as soon as the funds are disbursed. While students have the option to defer interest payments until after graduation, it’s important to note that the accrued interest will be added to the loan balance, resulting in a larger amount to repay over time.

In order to qualify for any student loans from the government, first you must fill out the FAFSA. Completing this application process can be daunting, especially if you are a first time applicant. We have included detailed instructions below to help you prepare for the process.

Completing the FAFSA

The FAFSA is a crucial step in accessing financial aid, including federal student loans. Here are some basic instructions to help you through the process:

  1. Gather Required Documents: Before starting the FAFSA, collect necessary documents such as your Social Security number, driver’s license, tax returns, W-2 forms, and bank statements. Additionally, have your parents’ information ready if you’re considered a dependent.
  2. Create an FSA ID: Visit the Federal Student Aid website ( and create an FSA ID for both you and your parent (if applicable). This unique username and password combination will be used to sign and submit the FAFSA.
  3. Start the Application: Begin the FAFSA online by visiting Fill in personal information, including name, address, and school choices. Remember to list Citizens First Bank as a potential lender if you’re considering private student loans.
  4. Financial Information: Provide accurate details about your income, assets, and any untaxed income. If you’re a dependent student, you’ll also need to include your parents’ financial information.
  5. Sign and Submit: Carefully review your FAFSA for any errors, ensuring all information is accurate. Sign the application electronically using your FSA ID and submit it. After submission, you’ll receive a confirmation email.
  6. Review Your Student Aid Report (SAR): Once your FAFSA is processed, you’ll receive a SAR. Review it carefully, making sure all information is correct. If corrections are necessary, follow the instructions provided.
  7. Evaluate Financial Aid Offers: After submitting your FAFSA, colleges and universities will send you financial aid award letters. Compare the offers, considering grants, scholarships, work-study, and loans. Contact the financial aid office for any clarifications.

Navigating the world of student loans can feel overwhelming, but with a thorough understanding of loan types and the FAFSA process, you’re equipped to make informed decisions. Remember to explore federal loan options first, and if needed, leverage private student loans responsibly. Your dreams of higher education are within reach! And if you need advice, contact us at Citizens First Bank. We are committed to helping students navigate the complexities of student loans and achieve their educational goals while building a solid financial foundation for the future.