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Scholarships and grants can lower your college costs, and unlike loans, they do not need to be paid back. It’s always best to pursue that kind of “free” funding first. Loans should be your last resort for financial aid.
However, taking out loans is not the end of the world. Competition for financial aid can be fierce, and not every student is able to secure enough to pay for all their college expenses. Loans let you continue your education, and that’s critically important.
If you need to take out a loan, make sure you do your homework beforehand. The terms of loans—the rules governing when you have to pay them back, and how much interest you must pay on them—can vary a great deal, and the difference between a smart loan decision and a poor loan decision can be dramatic.
Your 1st stop in the Financial Aid process should be filling out the FAFSA. It opens on October 1st! More information can be found using this link: FAFSA info. Submit your FAFSA early for a better chance of qualifying for grants and better loan options! There are 4 mian types of loans that the US federal government offers to students who qualify filling out the FAFSA:
Stafford loans: These are offered based on financial need, and you do not need to pass a credit check to receive one. There are maximum borrowing limits for Stafford loans. Stafford loans may be subsidized or unsubsidized.
Perkins loans: Available to students from families with “extreme” financial need, Perkins loans have fairly generous repayment terms, including lower interest rates and longer grace periods following graduation than other federal loans.
Parent PLUS loans: These are unsubsidized loans with no maximum borrowing limit that undergraduates can use to bridge the gap between the amount of money they need to pay for school (including living expenses) and the amount available through Stafford loans, scholarships, grants and other financial aid sources. PLUS loans need to be cosigned for by an adult guardian, and a credit check is required.
Graduate PLUS loans: Very similar to Parent PLUS loans, Graduate PLUS loans do not require an adult to cosign. They are intended for graduate and professional students who are themselves adults
Subsidized vs Unsubsidized:
Subsidized loans: a kind of loan offered by the federal government to students who demonstrate sufficient financial need when they fill out the FAFSA. With a subsidized loan, the government will pay your interest for you while you are in school. That’s a great deal! If you need to take out loans, always take out subsidized loans first if the option is open to you.
Unsubsidized loans: loans that continue to accrue interest while you are in school. With an unsubsidized loan, the amount you need to pay back will continue growing as you work toward your degree.
Private student loans can help fill the gap between federal student loans and other financial aid to help pay for college. SimpleTuition.com and eStudentLoan.com are two sites that let you search for loans from multiple lending agencies. The College Board has a very good information section about loans as well.
Be careful when applying for a private loan. Read the fine print. Remember that lending agencies exist to make money off of the interest they charge you! The federal government offers relatively low interest rates on its loans, but private lenders can and do charge much more. The difference between a loan at a good rate and a loan at a higher rate can be many thousands of dollars over the course of repayment. Experiment with this loan calculator to decide what kinds of loans you can really afford.
One final caution about loans. Missing payments on your loans once the period of repayment begins can really hurt your credit rating. Bad credit makes it much harder to get loans when you need them, for things like a car or house. Having bad credit will also drive up the amount of interest you have to pay on future loans, because lenders see you as a risky investment!
A resource for financial aid: https://studentaid.gov/resources
Here is a brief list of websites that provide loans:
College Covered (Discover) Private Student Loans: Your Complete Guide
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