Applying for College Loans: The Funding Options Available to Students
College presents many financial challenges. For some students, the biggest problem is finding funding to pay for fees and tuition, while for others, the chief problem is meeting living expenses. But there is a wide array of college loans available, with the right one depending on the circumstance of the particular applicant.
There are two principal sources of funding available to students: namely, privately funded loans that have been granted by banks and credit unions; and publicly funded loans that have been granted by the federal or national governments. The federal option makes low interest loan approval a reality.
There is third source of funding that most students would always prefer because it creates no debt and requires no repayments. Scholarships ensure that especially talented individuals, whether in academia or athletics, are able to improve their gifts while securing an education. But what are the pros and cons of each of these student financial aid options?
The Public Option
For students, a publicly funded loan is the most affordable funding option, with lower rates and better repayment terms provided. As college loans go, these are the least costly with interest rates set at a low fixed rate, making it easy for borrowers to budget for the repayments.
There are a number of public loan options available, with the most commonly sought being the Stafford Loan and the Perkins Loan. The key difference between them is that the Perkins Loan package is designed for students who are already in acute financial need, but both provide low interest loan approval.
The first step to applying for these loans is to fill out a Free Application for Federal Student Aid form, better known as a FAFSA form. Once this is done, the financial aid office on campus can identify which loan program is right – though they may also show an applicant is not eligible for any of the federal student financial aid options.
The Private Option
The private option is clearly the most expensive, but eligibility is not a question. There are criteria that need to be met before any lender can grant a college loan, but even a very wealthy student can get one if he or she wishes; publicly funded loans are reserved for those in need of financial help.
There are a number of issues to keep in mind, not least the interest rate charged. Unfortunately, lenders consider students’ bad credit borrowers, so low interest loan approval is extremely unlikely. There are other benefits; for example, interest-only repayments schemes and repayment deferments (usually until graduation).
In most cases, a private student loan is available at a variable rate, which means the repayments can fluctuate. But an advantage is that add-on loans can be applied for at any time. So, as student financial aid options go is the most open to all.
In truth, scholarships are not really college loans but are simply incentives given to individuals by a college or institution, federal or local government, and even private individuals. But they are a source of funding that can be extremely valuable to those lucky enough to get one.
While it is not usual to actually apply for one, in the same way a loan is applied for, it is normal to seek acceptance on a scholarship program. But unlike any low interest loan, approval is based on academic or athletic ability, not income.
For any college-goer, there are a wide variety of student financial aid options to consider. It is always a good idea, however, to speak to a loan officer in your own college before applying, and make sure the options are clear. Then, the funds needed can be secured with the least amount of fuss.