One of the most important things to plan for when considering college is the expense. Expenses include everything from tuition and fees as well as room and board. On top of those needs, students must consider the costs of books, transportation and supplies. Luckily, there are several student loan options available to cover these costs. The ideal way to pay for college is with a scholarship, which doesn't require any repayment. However, it's not always possible to get a full or partial scholarship. In these cases, getting a student loan is the best option.
Whether it's a federal loan, private loan or a loan from family, it's necessary to weigh the pros and cons of each loan type. For all, never borrow more than what is necessary. Keep costs at a minimum whenever possible, and stay aware of the future monthly loan repayment amount to stay on track.
Federal Student Loans
Federal student loans offer low interest rates and include several different types, including subsidized and unsubsidized loans. The type of loan depends on whether the student is an undergraduate or graduate student. To apply for any federal loan program, fill out the Free Application for Federal Student Aid, or FAFSA, form. This form needs to be completed each year. The FAFSA form is fairly simple and straightforward. Gather personal information, as well as the parents' Social Security numbers and income information before getting started to make the process easier.
Some of the pros to federal student loans is a fixed interest rate, as well as delayed repayment. This means students do not need to begin repayment until after they graduate from college. Additionally, undergraduate students can apply for subsidized loans, which do not require interest payments until after the student graduates from school.
Private loans may or may not be a good idea, depending on the person's income and long-term plans. Private loans tend to have higher interest rates than federal loans, and can require repayment even while the student is attending school. In some cases, the interest rate is not fixed, which can lead to unanticipated, high rates. These loans also require credit checks and, depending on the student's credit, may require cosigners.
One of the more well-known private educational lenders is Sallie Mae. It offers loans for undergraduate and graduate students, including loans for specific medical schooling and residencies. These loans are available to be used towards a range of educational expenses including tuition, room and board and supplies.
Another common source of private loans is a bank or credit union. Many of these institutions offer great interest rates and loan terms that appeal to students. Borrowing from a bank is a good way to establish a long-term relationship with a lender.
For students with well-off family, getting a loan from family members can be less burdensome than getting an official loan from third parties. However, be sure to clearly establish the loan terms and to commit to paying the family member back on a pre-determined schedule.