In the United States, enrolling in a college or university is one of the most expensive investments people can make. With the rising cost of higher education, the majority of students are required to take out loans in order to afford their undergraduate or graduate degrees.
Depending on your needs, you might need to take out a federal or private loan. However, even within these two categories, there are are a variety of different loan options you can take advantage of. You may also be able to take out a grant to help you fund your education.
Before you choose a loan, it’s important that you familiarize yourself with your options. Furthermore, you need to make sure you understand who qualifies for loans and how you can apply for them. You also need to check first and see if you qualify for any government grants that can help you. Review the sections below to help you get a better understanding of the funding options you could take advantage of.
Student Grants 101
Grants are some of the most popular funding tools you can use to help you afford your education. These funding opportunities are usually awarded by the government. One of the main reasons grants are so popular is because they don’t have to be paid back.
Eligibility for Grants
Your eligibility for an educational grant will depend on several factors, including your income (and your parent’s income, in some instances), academic requirements and other qualifications. You will need to apply for each grant or scholarship program individually. You may be able to find programs that you qualify through:
- The federal government, such as the Pell Grant.
- Your local community or the school you intend to attend.
- Nonprofit and charitable organizations.
You may be required to fulfill specific obligations in order to receive a grant or scholarship. For example, several scholarships require applicants to write an essay about a specific topic. Make sure you understand the eligibility requirements for the grant you apply for.
What can I use my grant money for?
In addition to obligations that you must meet to receive a grant, it is crucial that you understand the rules for spending any grant-based financial aid you receive. For example, the federal government requires students who receive grants to meet requirements relating to the number of hours they must be enrolled in classes. Students also will likely need to maintain a certain grade point average (GPA) to keep their grants.
Additionally, certain grants may require you to earn a specific degree or find a career in a particular field within a specified time frame. Should you fail to meet a grant or scholarship’s continued eligibility requirements, it is possible that your grant or scholarship could be turned into a loan that you would need to repay.
List of Student Grants
- TEACH grants for students who want to be teachers
- Pell Grants for undergraduate students
- Grant for children of military service members
Student Loans vs. Other Types of Loans
Student loans work essentially the same way as other types of loans. Just like any funds that you may borrow, student loans are amounts of money that you must repay monthly for an agreed term.
You should consider some important aspects that make student loans different from other types of loans. These characteristics include:
- Low-Interest Rates: Student loans tend to cost less than other types of loans. This is because the annual percentage rate (APR) is lower than those for regular loans. Moreover, this interest rate is generally fixed. If you have a high credit score, you may be able to apply for a subsidy by the federal government to cover the loan interest cost.
- Easier access: Many student loans do not require you to have a high credit score. Therefore, you can easily get a student loan if you have poor credit or no credit at all. Student loans will also help you build your credit score, so long as you make timely payments each month.
- Flexibility: Most student loan applicants do not have a reliable source of income. For this reason, there are certain student loans that they can take out that they only need to start repaying once they’ve graduated.
Types of Student Loans
Federal government loan agencies and private agencies offer many student loan options. You can qualify for federal loans by submitting a Free Application for Federal Student Aid (FAFSA). These loans can help you cover a large percentage of your tuition and other education costs.
Some loans you may qualify for include:
- PLUS loans. These loans are generally issued to parents who have children who are pursuing higher education. The government is in charge of issuing these loans, and they are also accessible for graduate students. In order to obtain one of PLUS loans require a good credit history.
- Perkins loans. This is the most common type of student loans. Perkins loans are need-based and are limited in supply. Credit scores do not affect an applicant’s eligibility for this loan.
- Stafford loans. More students are able to apply for this loan, as it offers a wider range of coverage. Applicants may have a harder time qualifying for this loan than for the Perkins loan, but this loan offers higher amounts of aid.
- Consolidation loans. This loan allows students to reconfigure their previous student loans into a more a manageable loan. Qualifying applicants may also be subject to better interest rates than those from their previous loan.
- Private loans. Local agencies also have several student loans available. Private loans tend to be credit-based, but they are meant to help students cover additional expenses that their student loans from the government did not cover. You should be cautious when you apply for private loans, as some lenders have hidden extra fees.
Free Microsoft Excel Templates to Manage Student Loans:
- College Loan Calculator
- Loan Amortization Schedule
- Loan Calculator with Extra Payments
- Personal Monthly Budget Planning
How to Apply for Your Student Loan
Filling out your FAFSA application is a requirement to access federal loans and other types of funding. In order to obtain coverage, you must complete the form every year that you plan to attend school. To submit your form, you can complete the process online or by mail.
You have to provide information including the following:
- Your contact information
- Social Security Number (SSN)
- Educational history
- Information about your parents and legal guardians
- Income and household expenses information
On the other hand, keep in mind that private lenders have a separate application and may ask for different information. You may also have to provide additional documentation. However, some lenders will have some guidelines that will be similar to the FAFSA application.