Attending an upper education school to get a degree can be very expensive in America. However, this should not stop you from attending school and pursuing your dream career.
There are other options that the federal government offers you to complete your degree other than having to pay for it out-of-pocket. Just like the federal government, the private sector has also created simple and comprehensive ways to help students afford quality education.
Other than federal grants, the U.S. Department of Education (ED) makes it easy for students to access different types of loans. These loans were created by the ED to help students pay for their educational expenses. However, many students apply and obtain loans without fully understanding how they work. For that reason, you should be fully prepared and know what to look for in a student loan. You can learn more about student loans, how to apply and more by reading the sections below.
Understanding Student Loans
Some careers do not require you to have a college degree, and you can enter the workforce to start building your career. Even though you can save a lot of money by not having to pay for a degree, this is not the case for every field. You can afford to go to a higher level institution with the help of student loans to get the degree you need for the career you want to pursue.
The ED and other private loan agencies have loans available for you to apply and obtain financial aid you need to afford college expenses. Even though loans are a useful tool to help you afford your education, you should look into any grants or scholarships. These types of financial aid are gifts. They should be your priority as you do not have to repay them.
Your eligibility for an educational grant will depend on several factors, including your income (and your parent’s income depending on your age), 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.
In addition to obligations that you must meet to receive a grant, it is crucial that you understand the rules for spending any financial aid. For example, the federal government requires students to meet a certain number of credit hours and to use funds towards approved education expenses. 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.
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. Student loans also have an added percentage to cover the cost of borrowing the funds. But 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 as their APR is lower than those for regular loans. Moreover, this interest rate is generally fixed, as opposed to varying interest rates other loans have. 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 or even a credit score at all. Therefore, you can easily get a student loan if you have bad to no credit. Student loans will also help you build your credit score as long as you make timely payments.
- Flexibility: Since most student loan applicants are students who may not have a reliable source of income, students only have to pay back the loans after they graduate. Some loans also eliminate interest rates too, and the interest charge only starts after graduation.
Types of Student Loans
Federal Government loan agencies and private agencies offer many student loan options. You can apply for federal loans through the Federal Student Aid (FAFSA) program. These loans can help you cover a large percentage of your tuition and other education costs. But this is just the first step. You should also consider looking into loans offered by private lenders. These loans can supplement your federal loans and help you cover the totality of your college expenses. Some of the loans that you may be eligible to apply include:
- PLUS loans. These loans are meant to go for the parents of students to help them pay bigger college expense of their child. The government is in charge of issuing these loans, and they are accessible for graduate students. 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, and it offers low interest for high amounts of aid.
- Stafford loans. More students are able to apply for this loan, as it offers a wider coverage. Applicants may have a harder time qualifying for this loan than for the Pekins loan. However, this loan offers higher amounts of aid.
- Consolidation loans. This loan allows students to manage the aggregate of their debt into a single, more a manageable loan. Qualifying applicants may also pay better interest rates than those from their previous loan.
- Private loans. Local agencies also have several student loans available. However, private loans tend to be credit-based, but 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 and Manage Your Student Loan
Filling out your FAFSA application is a requirement to access federal loans and other types of funding. You must complete the form every year that you plan to attend school to obtain coverage. To submit your form, you can complete the process online or by mail. You have to provide information including:
- Personal and contact information
- Social Security number
- Educational history
- Information about your parents and legal guardian
- Income and household expenses information
Private lenders have a separate application and may ask for different information. You may also have to provide additional documentation, but some lenders will have some guidelines that will be similar to the FAFSA application. You should ask any questions you may have to the lending institution before taking out a loan with them.
When you receive the funds from the loans that you apply for, you will also receive information about payments, interest rates and the term of the loan. The lending institution will also disclose any additional information including possible consequences if you are not able to pay back for the funds you borrowed.
Moreover, once you start paying back the loan, you will be on track to build or improve your credit score. Make sure to make all the payments on time and contact the lending agent in case you have any change in circumstances that prevent you from making your payments.