How Scary Are Student Loans?

With the economy the way it is today and the average cost of tuition rising, most students right out of high school have little hope of being able to afford their own college education. There are options available, but which ones are better suited for students? Of all the options available, in my opinion, I think that to play it safe, a future college student would be much better off applying for federal grants and scholarships rather than turning down the road of private or federal student loans. There are some pretty scary figures beginning to add up within recent graduating classes. More and more graduates are being left in debt…very deep debt. But there are options for paying tuition that won’t harm a student’s credit.

Sifting through all the information and options concerning student financial aid can be stressful. But there are resources and information that can give you facts that will help you find the option that will not break your bank. (Photo courtesy of mcdowelltech.edu)

• Federal grant programs are available

• The best option for most students would be community college and public universities—these have financial aid services designed to help students figure out tuition costs and how to afford it

• Federal student loans are available—still being loans, but better than private student loans

• Remember that there is Financial Aid through the university/community college and they should point in the right direction based on what the student needs

When looking through and choosing colleges and programs therein, the student must consider finances as one of the topmost decision making factors in their choice. Public and community colleges should probably be considered more than private universities, as they are non-profit schools with more options financially than private universities. For-profit private universities are typically way more expensive tuition-wise, and some may require the student to complete irrelevant and unnecessary courses that are irrelevant to the skill set of their chosen degree or certification program.

As far as financial services go, though, I think looking for a federal grant or scholarship is the way to go. These are considered “gift money” and do not require the student to pay anything back. While grants are based on need, scholarships are more centered on merit, academic reputation, a special trait or talent, etc.

• Federal Pell Grants

• Federal Supplemental Educational Opportunity Grants (FSEOG)

• Teacher Education Assistance for College and Higher education Grants (TEACH)

• Iraq and Afghanistan Service Grants

For more information on grants and applying for scholarships (yes they’re available to any student attending or that will be attending college) please look at this website: Student Aid 

When thinking about a student loan, one must consider each side of the coin: federal or private? To give a brief overview of each:

• Federal loans do not require repayment as private loans sometimes require repayment while the student is still in school.

• Federal loans have fixed interest rates, whereas private loans carry a variable interest rate—sometimes upwards of about 18%!

• Students applying for a subsidized loan can count on the government to pay some of the interest while private loans are not subsidized.

• Most federal student loans do not require any credit check, and most private loans require it.

• Federal loans carry more repayment options, and some are based on income while private loans, well, the student would need to double-check.

For more differences and information on student loans look at this page from Student Aid

While I am not trying to scare any prospective college students, I am trying to make aware the points about student loans. When consulting a financial aid service and looking into apply for a student loan, the student needs to become knowledgeable and find understanding in anything they are told or read. This can be the biggest difference in whether the student receives a loan that they are never going to be able to repay and a loan that is reasonable and repayable. Just look at these few statistics:

• Around 65% of students who applied for loans did not understand the student loan process

• Around 2/3 of students who applied for loans did not understand the difference between federal and private loans

• A big percentage of students who obtained student loans did not really understand or were not informed of what the repayment options were or what their future monthly payment plans were going to look like (for more on the numbers look at this)

Following are a few helpful sites with information regarding student financial aid:

FinancialAid.Case.Edu  offers a list of financial aid options available to the student

FinAid.Org  Answers some FAQs about student financial aid

DistanceLearning.Com  Read through this great informational page concerning financial aid for distance learners

Act.Org  offers some great questions to keep in mind when discussing financial aid options with an adviser

DistanceLearning.Com/How-Do-I-Pay-For-College? a great article centered around financial aid information

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