Funding College with Loans - Financial Aid Help

If funding college is an issue, talk to your guidance counselor and your family about possible options.  Few students can afford to pay for college without some form of education financing.  Most colleges offer financial aid and/or academic scholarships, so ask about both.  When researching financial aid information it is best to checkout that school’s website for more information.

An education loan is a form of financial aid that must be repaid, with interest.  Scholarships, on the other hand, do not have to be repaid.  If you receive a loan, you must sign a promissory note.  This document acknowledges your acceptance of the loan’s terms and conditions.  Typically, student loans are managed by banks and financial institutions, which handle payment options and determine how much interest you will pay.  The bank will provide you with a payment schedule, as well as the approximate date that the loan will be paid in full.

Education loans come in three major categories

1.)  Student Loans: e.g. Stafford and Perkins loans

2.)  Parent Loans:  e.g. PLUS loans

3.)  Private Student Loans (also called Alternative Student Loans)

Student Loan Information

The Stafford Loan

The Stafford Loan requires no collateral, has a low interest rate, and must be repaid beginning six months after graduation for students attending school at least “half time.” (Half time means you have to be taking at least six credit hours a semester.)

The minimum you may borrow fluctuates annually and escalates from your freshman to your senior year. In many cases, the Stafford Loan can be subsidized based on financial need, meaning that interest will not start accumulating until six months after you graduate.

Stafford Loans are designed for students who cannot cover all of their expenses during college and will likely gain employment upon graduation.

The Perkins Loan

The Perkins Loan is based entirely on financial need. There are maximum amounts a student can borrow for undergraduate and for graduate school. These loans have low interest rates and do not require repayment until nine months after you graduate.  A Federal Perkins Loan is a low-interest (5 percent) loan for both undergraduate and graduate students with exceptional financial need. Federal Perkins Loans are made through a school's financial aid office. Your school is your lender, and the loan is made with government funds. You must repay this loan to your school.

Your school will either pay you directly (usually by check) or apply your loan to your school charges. You'll receive the loan in at least two payments during the academic year. 

Parent Loans

The Plus Loan

The PLUS Loan (Parent Loan for Undergraduate Students) is offered to parents of dependent students who require financial assistance. The interest rate is low and repayment begins 60 days after the final loan payment.  Parent PLUS loans are the financial responsibility of the parents, not the student. If the student agrees to make payments on the PLUS loan, but fails to make the payments on time, the parents will be held responsible.

Private Student Loans

Private Student Loans, also known as Alternative Student Loans, help bridge the gap between the actual cost of your education and the limited amount the government allows you to borrow in its programs.  Private loans are offered by private lenders and there are no federal forms to complete.  Eligibility for private student loans often depends on your credit score.

Some families turn to private student loans when the federal loans don't provide enough money or when they need more flexible repayment options.  For example, a parent might want to defer repayment until the student graduates, an option that is not available from the government parent loan program.  (Many PLUS loan providers are starting to allow parents to defer payments on the PLUS loan while the student is in school using an administrative forbearance.  Interest continues to accrue, however.)

Private student loans are taken out from banks, lending companies or other private entities, in the student's name, usually with a co-signer

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