Student Financial Aid Basics - Understanding Your Options And What They Mean
Posted on April 4, 2008 - Filed Under Education
If you plan to attend college, but donít have wealthy parents to pay the cost, a student loan is your best bet. Financial aid makes it possible for anyone to attend a college or university. With so many available options, choosing the right financial aid option can be overwhelming. Fortunately, colleges and universities employ expert financial aid counselors trained to help you make the right decision.
What is Financial Aid?
Financial aid is a term used to describe monies that an individual receives to help pay the cost of college tuition, books, and living expenses. There are many types of financial aid. Some students qualify for grant programs, which is free money for college. Meanwhile, other students participate in work-study programs that offer to help pay the cost of tuition.
Qualifying for a grant or work-study program is difficult, and in some instances, these programs are limited to low-income students. That is why a majority of college students apply and receive tuition assistance through a Federal Student Loan program.
Federal Student Loan Options
The Federal government offers a variety of student loan options. Many students have found the Federal Stafford Loan to be a good choice. This simple interest loan is easy to qualify for and is available to undergraduate and graduate students. Even better, Federal Stafford Loans donít require collateral or excellent credit. The interest rate is usually fixed at 6.8%, and repayment doesn’t start until six month after graduation. Deferment or forbearance is available to borrowers who experience economic hardships.
Another Federal student loan option is the Federal Plus, wherein parents borrow the funds for their child’s education. Similar to the Federal Stafford Loan, this loan also requires no collateral. The primary difference between both loan options is that the Federal Plus has a fixed rate of 8.5% and repayment begins 30 days after disbursement.
Alternative Student Loans
Sometimes, the loan amount received from a Federal student loan isn’t enough to cover all expenses. In this situation, students have to pay the difference out-of-pocket, or apply for an alternative or private student loan. The main disadvantage of a private student loan is that the interest rate is usually higher than a Federal loan and satisfactory credit is a requirement.
See our Recommended Student Loan Consolidation Companies Online. We maintain a list of our favorite student loan consolidators (both private and federally funded).
Tags: student financial aid, student loans
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