Getting The Right Kind Of Financial Aid For College

cp_5Loans, scholarships and grants make up the bulk of college student’s financial aid options. Student loans, in particular, are a useful form of financial aid. The federal government offers them to students based on financial need, and private lenders also offer student loan options. Become familiar with each type of loan before you launch blindly into applying for loans.


The first step to getting financial aid is to submit the Free Application for Federal Student Aid, or the FAFSA. You can do this online, or you can get a paper copy of the application from your college’s financial aid office. The application requires you to fill out personal information about yourself and your finances. If you are a dependent, you must also fill out financial aid information for your parents. Gather tax forms, bank statements and other financial documents before you fill out the FAFSA so that you can fill it out in one sitting. The FAFSA offers definitions for “dependent” in the application. When you have submitted the FAFSA, you will receive a statement with your Expected Family Contribution, a number that colleges and the federal government use to determine your eligibility for student loans and grants.


The federal government offers several types of grants, one of which is the Pell Grant. The Pell Grant is worth up to $5,550 for the 2011 to 2012 school year. Some other grants include the TEACH Grant and the Federal Supplemental Educational Opportunity Grant. Each grant has its own eligibility requirements, and the amount of each grant differs.

Stafford Loan

One of the most commonly-awarded federal student loans is the Stafford Loan. This loan comes in subsidized and unsubsidized versions. “Subsidized” means that the federal government pays the interest on your loan while you attend college. “Unsubsidized” means that you are responsible for paying the interest on your loan while you are in school, although you can postpone paying the interest until you graduate. The amount of interest you put off is added to your principal loan amount. The Stafford Loan does not have a prepayment penalty.


The federal PLUS Loan is a loan the federal government offers to parents to pay for their children’s education. Another form of the PLUS Loan is for graduate students who must pay for their tuition themselves. The interest rates on PLUS loans are low compared to private loans, and PLUS Loans can be used to fund all of a student’s education.

Perkins Loan

The federal Perkins Loan is offered to students who have high financial need. The interest rate is low, and, like other federal loans, it comes with a grace period that will allow you some time to find a job after you graduate so that you are more prepared to pay your loans on time.

Consolidation Loans

If you already have federal student loans, you may consider getting a consolidation loan. A consolidation loan takes your other federal student loans and puts them into one loan. A consolidation loan can help you by giving you longer to repay your loans (up to 30 years) and can significantly decrease your monthly payments. However, over the life of your loan, you may end up paying more in interest than you would if you had not consolidated. You may also lose benefits under your original loan’s terms like interest rate deductions for making payments on time, loan cancellation programs and principal rebates if you consolidate. Once you consolidate your loans, the action cannot be reversed. Carefully weigh your choices as you consider consolidation loans. To be sure you qualify for FAFSA, we recommend you get an accredited high school diploma from a Regionally accredited online high school, like Excel online high school.

Private Loans

You can also apply for private loans to pay for college costs on your own. Private loans typically have much higher interest rates than federal student loan rates. They often have grace periods like federal loans, however. They may or may not have prepayment penalties. One downside to private loans is that interest rates often change on them. Federal loans typically have fixed interest rates. This means you will pay the same rate of interest each month over the life of your loan. You don’t have to worry about increasing interest rates and higher monthly payments. Private loans, can, however, offer students who don’t qualify for federal student loans a chance to attend college.

Tips for Getting a Loan

Establish good credit before you apply for a student loan. If your credit is poor, it can be more difficult to get a loan, and it can be more difficult to get a loan with a low interest rate. This means more money you end up paying over the life of the loan. You might build up good credit over time by paying off your debt. If you cannot establish good credit before you go to college, ask someone with good credit to co-sign the loan for you. This serves as a guarantee to the lender that someone will be responsible for paying the loan if you go into default and are unable to meet the loan’s repayment requirements.

Shop around for a good loan before you accept any lender who comes your way offering to immediately approve you. Determine exactly how much money you will need, and don’t take out more money than your tuition or living costs require. Any amount you take out must be repaid with interest. Read the fine print on any promissory note you are given. Compare the interest rates, loan origination fees and repayment terms and conditions from several lenders before you sign any papers. Federal loans are serviced through lenders, meaning that various banks and lenders will offer federal loans for college tuition, and the terms are basically the same between lenders. The administrative practices of each may vary, however.

Research your student loan options carefully. You may find that you don’t qualify for federal student loans, grants or even some merit-based scholarships or grants. You may need to rely on private student loans to pay for college. Whether you need a large loan or a small one, both private and federal loans offer options to help you pay for your college expenses. Read the fine print, and weigh your needs before you take out any loans.