Researching Financial Aid Options
The first step in the process is for students to find out how much college costs by researching different schools:
- – How much do different schools charge for tuition? How about for room and board? The total of these expenses is called a school’s cost of attendance (see Terms to Know at right).
- – What will it cost if the student chooses to live off campus near his or her favorite colleges?
- – How do the costs and benefits of private colleges compare to those of public and community colleges?
- – What academic programs are offered at students’ potential college choices? Will students graduate with the ability to become good wage earners—and repay their loans?
Grants and Scholarships
Grants and scholarships (see Terms to Know at right) do not need to be repaid and do not charge interest. Work-study programs, which allow students to fill positions (usually on-campus) and work a guaranteed number of hours toward their college costs, are also highly attractive options. See our Resources section for information on how to find grants and scholarships.
Loans
Did you know that the federal government has several different kinds of federally insured loans? Each loan has different eligibility requirements, benefits, and costs:
Federally Insured Loans
Perkins
Perkins loans are granted by colleges to students with exceptional financial need. They offer very desirable terms.
- – Their fixed interest rate is 5%, which is lower than the rate of other federal loans
- – A 9-month grace period before repayment exists after students graduate, withdraw from school, or cease to be enrolled at least half-time
- – For students in certain professions, Perkins loans may offer generous forgiveness programs after graduation.
Stafford Subsidized
Stafford Subsidized loans are the form of federal financial aid most commonly offered to students by colleges. These loans are granted to students but usually disbursed (see Terms to Know at right) to schools, who apply the funds toward tuition, fees, and room and board expenses. The fact that these loans are subsidized (see Terms to Know at right) means that their terms are more desirable than some other loans:
- – They accrue interest while students attend school, but the U.S. government pays the interest until the repayment period begins
- – A 6-month grace period before repayment exists after students graduate, withdraw from school, or cease to be enrolled at least half-time
- – These loans are awarded based on financial need
Stafford Unsubsidized
Stafford Unsubsidized loans are not subsidized, so the federal government does not pay the interest they accrue while students are in college. As a result, borrowers may either pay the interest on these loans while they are in school or allow the interest to be added (capitalized) onto the principle balance at the end of the loan period.
- – A 6-month grace period before repayment exists after students graduate, withdraw from school, or cease to be enrolled at least half-time
Parent PLUS
Parent PLUS loans may be borrowed by students’ parents or guardians.
- – These loans remain the responsibility of the parents until they are paid in full and cannot be transferred to students after their college studies are completed
- – PLUS loans may be applied toward any remaining tuition, fees, or room and board costs not covered by other types of financial aid
- – Parents must successfully pass a credit check and meet other eligibility requirements before borrowing
- – Unlike other federal loans, which start repayment once college classes have finished, PLUS loan repayment begins almost immediately after the funds are received by the school
- – As a result of the recent ECASLA legislation, parents may apply to defer PLUS loan repayment until after students graduate, withdraw from school, or cease to be enrolled at least half-time
See our Resources section for more information.
