College Financing — Student Loans

Student Loans

If you've explored grant and scholarship possibilities and still find yourself still falling short of what you need to pay for school, a student loan can make the difference. They offer lower interest rates than many other financing options and many students wouldn’t be able to afford college without them.

There are different kinds of student loans. Some are based on financial need, some aren’t, but one thing most of them have in common is that you must be in school at least half-time while using the money. If your class load falls under half of a full time load, you will have to start repaying the money immediately.

• Unsubsidized Stafford Loans. These loans are not restricted by income and have a fixed interest rate. These loans accrue interest while you are in school (though the payments can be deferred and added to the principal after graduation).
  
• Subsidized Stafford Loans. These are need-based, have a fixed interest rate and the federal government pays interest while you are in school and during a six-month grace period after graduation.
  
• Perkins Loans. These federal loans—which are available for both undergraduate and graduate students—are reserved for students who demonstrate an “exceptional financial need.” While they have lower overall limits than other federal loan options, the other terms of the Perkins Loan (interest rate, grace period, fees, and repayment options) are the most generous.
  
• The Federal Parent PLUS Loans. This program offers loans for parents to pay for their child’s college education at a fixed interest rate with flexible repayment options. They’re not based on income or assets and can be used to cover all college costs, minus other financial aid.
  
• Bank Loans. If federal student loans and other aid aren’t enough to cover all the costs of college, a private student loan could help. Private student loans may offer a better interest rate than using credit cards to pay for education-related expenses and they can be an alternative to leveraging home equity, savings, or investments.

Tips for shrinking the cost of college expenses

• As you are deciding which school to attend, shop around. Focus on academics and make sure the school meets your needs. It’s a good idea to take the cost into consideration, but don’t let the cost alone be the deciding factor. Aim for the best education you can achieve, and then work on a strategy to pay for it.
  
• Consider the cost of transportation to and from school. Cross-country flights for Thanksgiving and Spring Break can add up.
  
• Be frugal. Consider buying used textbooks, leaving the car at home—bikes are better for the environment, anyway—or eating in the campus dining room instead of the local diner.