Time is getting tight for students in the college class of 2018 and their parents. As these freshly-minted high school graduates get set to embark on their college careers, there is a final mad dash to get all of the college financial aid and financing into place. One helpful component of this process can be college student loans, but it can be somewhat confusing to understand all of the variables involved. Here are five tips to help you successfully navigate the student loan maze:
1. Maximize the amount of “free” financial aid: This is financial aid that usually does not have to be repaid, such as grants and scholarships, although there might be some exceptions if you drop out of school. This type of aid can come from the U.S. federal government, the state where you live, the college you attend, or a nonprofit or private organization. Work-study programs allow you to earn money to help pay for your college education. There are also a number of other programs for students in specific situations, such as the child of a veteran.
2. Consider federal student loans first: If the financial aid does not completely cover your college costs, the next step is to investigate student loans. This is money you borrow, which will need to be repaid with interest. Federal student loans from the U.S. government usually offer lower interest rates and flexible repayment options.
3. Learn about the types of federal student loans: The federal Direct Loan Program is the largest federal student loan program. In these programs, the United States Department of Education is the lender. Direct Subsidized Loans are made to students with a demonstrated financial need. The government pays the interest while the student is in school. Direct Unsubsidized Loans are made to students regardless of financial need. Interest accrues during the school years, but is deferred until repayment begins. Direct PLUS loans are made to parents. The Federal Perkins Loan Program is a school-based loan program for undergraduates and graduate students with exceptional financial need. Under this program, the school is lender.
4. Review your private student loan options: If you have exhausted all of your federal student loan eligibility, then it is time to turn to private student loan options. These loans are made by a lender such as a bank, credit union, state agency, or a school. There are several differences between federal and private student loans, so always be aware of who the lender is.
5. Compare private student loan options: Not all private student loan options are alike. There may be differences in interest rates, payment terms, and upfront fees. Discover Student Loans provides an easy-to-understand chart which compares some of the most important features of its student loans against those available from other private lenders.
If you need more information about navigating the student loan maze, or want insights regarding the college financial aid process, contact College Financial Aid Advisors (CFAA).