Many college students today hit a hurdle before they even start when it comes to finding the funds necessary for college because they have already managed to run up a poor credit history. Fortunately however there are aid and loan packages available today which look principally at need and ignore your credit history and so this is where you will need to start your search for funding.
One of the oldest sources of funding and one which is chiefly available on the basis of economic need is the Pell grant. As long as the student and his family are considered to be a low-income family a Pell grant is more or less automatic and is made on the basis of the submission of supporting documentation.
The student will be required to provide proof of the cost of his intended course (including tuition fees and other qualifying costs) and will also need to provide details of the family’s income from which an EFC (Expected Family Contribution) number will be calculated. On this basis a decision will be made and the grant made or refused.
As the name suggests, a Pell grant is a ‘gift’ and not a loan and it does not have to be repaid. Pell grants are currently for a maximum of $4,731 a year (depending on your assessed financial need) and, while this will not normally cover the full cost of attending college, it can go a long way towards helping. However, most students will need to seek loan funding in addition to a Pell grant and the best form of loan funding initially are Stafford loans.
There are two different types of Stafford loan and the first is a subsidized Stafford loan on which the government pays any interest charges while you are studying full-time and for up to six months after graduation. The second type of Stafford loan is an unsubsidized Stafford loan on which you will be responsible for making all interest payments.
Unsubsidized Stafford loans need to be considered very carefully because, although you will be responsible for making interest payments, you will not be required to do so while you are in full-time education and for up to six months after graduation. However, during this period interest will still be applied to any loan and will simply be added to the outstanding amount of the loan. This means that during a three or four year college course your loan debt can grow substantially and reach a very significant sum by the time you do start paying it off.
Naturally, most students would prefer to have an unsubsidized Stafford loan but loans are disbursed according to the funds available and on the basis of need so that only a minority of students will qualify for a subsidized loan. The good news however is that most students will qualify for an unsubsidized loan and, despite their drawbacks, these still represent one of the best forms of college loan funding available today.
There are of course other forms of grant and loan funding available (and scholarships) and you need to shop around to see just what is available and best suits your circumstances. However for students from low-income families Pell grants and Stafford loans are invariably the best routes to follow.
By: Donald Saunders
Government loans are amongst the many options that are available for students when financing their education. There are scholarship programs and grants to apply for, as well as various student loan types. However, federal financing seems to be preferred by many students.
There are many federal loan programs that can be applied for by students and parents. The one most popular for parents is the PLUS loan program designed especially for parents and graduate students. The Stafford loan is the most popular choice for students. There are other programs that often fall under these two loan types. Within these types of loan programs there are two basic classes of loan to be aware of.
Most students and parents do not begin repayment of student loans until six months after the student is no longer attending college. While that may seem appealing the interest that can begin to accrue right away and that is expensive. That is where the two classes of loans come into play – unsubsidized and subsidized loans.
First lets consider a subsidized loan. This class of loan alleviates the worry of interest compounding during the students education. With a subsidized loan the federal government pays all interest that accrues on the loan until six month after the student is out of school. Neither parents or students have to worry about any interest payments until then.
With an unsubsidized loan repayment still does not begin until six month after the student finishes his education. However with this class of loan interest begins to accumulate as soon as the money changes hands. Annual interest is added to the principal amount of the loan at the end of each year which means that the following year interest compounds not only on the original principal amount of the loan but also on the previous years interest. With interest compounding in this way an unsubsidized loan can be quite expensive.
To understand exactly how much an unsubsidized loan with deferred payments will cost you, plug the numbers into a loan calculator. That way you will be able to use the numbers of your loan and the interest rate you qualify for. You will then see just how much you will have to pay in interest over the life of the loan.
Of course it would be ideal to fund an entire education with subsidized federal loans. But that is rarely possible. These loans are typically limited by parents’ income and it is extremely uncommon to receive 100% financing through these. Most students have to rely on a combination of different loan programs to fund their entire education.
To determine how you will be able to finance your education you can complete a Free Application for Federal Student Aid (FAFSA) at fafsa.ed.gov.
By: W. M. Blake
Before beginning the process of acquiring financial aid, it is important to understand a few essential facts, especially when it comes to student loans. This is particularly important because more and more potential college student have to rely on so many student loans these days. To begin with, it is vital to understand the two primary kinds of student loans. There are subsidized loans and unsubsidized student loans. The two types of loans are somewhat similar, but the differences between them are key. Understanding those differences is crucial when it comes to putting together a financial aid package.
To begin with, an individual student’s need for financial aid is what determines the amount of a subsidized loan. Some common subsidized loans are the Subsidized Stafford Loan and the Perkins Loan. Succinctly, a subsidized student loan does not make students pay interest while they are enrolled in college. Instead, the federal government takes care of the interest while the student is in school. This is, in fact, why they are called “subsidized loans” – while a student is in school, the government subsidizes his or her interest for the duration. Following a student’s graduation, there is a grace period, and after that, the student must begin paying back both the loan(s) and the interest.
Conversely, unsubsidized loans stipulate that a student must pay back the loan’s interest while he or she is attending college. That is, of course, why they are referred to as unsubsidized loans – the federal government does not subsidize any of the balance for the student. As with subsidized loans, students have a grace period immediately following their graduation from college. The main difference between subsidized loans and unsubsidized loans here is that all of the financial responsibility is solely left up to the student.
Another key difference between subsidized loans and unsubsidized loans exists in the amount a student is allowed to borrow each year. As aforementioned subsidized loans depend on an individual students need for financial aid and financial status. As such, there may be a limit to how much a subsidized loan allows any single individual.
While unsubsidized loans may also limit the amount given to any one student, their limitations are usually far lower than those for subsidized loans. In general, unsubsidized loans allow students to borrow as much as five thousand dollars more than subsidized loans offer.
In most cases, a student must be enrolled in college on a part-time basis, at least, in order to receive either a subsidized loan or an unsubsidized loan. If a student with a subsidized loan finds that he or she needs more money, he or she can certainly turn to an unsubsidized loan instead. However, that is not the only other option at all – there are many types of student aid available; these are just two of the most common kinds. There are also a variety of grants, scholarships, and private loans available if a student’s subsidized or unsubsidized loan does not meet all of his or her financial aid requirements.
By: Gary Marjani
