Using Student Loan Programs to Pay for Your College Education
Knowledge of the Topic is Power
Student loans are about much more than paying for college. If education headlines are any indication, student loans are all part political fodder, bargaining chip, and profitable business for student loan lenders. Once the paying is done however, another more serious matter ensues: repaying student loans.
Economics of Student Loans
No exploration of student loans is divorced of the general undercurrent, which is the continuing escalation of a tuition price tag. Today’s college costs continue to rise despite the demands voiced by legions of private citizens and politicians to sate the educational beast. The trend has been unstoppable for the last decade or so and as a direct result student loans have become a major course for issue.
Federal student loans, both Direct Federal Loans and those delivered through Federal Family Education Loan Program (FFELP) lenders, tend to fall short of real college costs. In turn real college costs drive the new world of alternative student loans; those cleverly packaged in lower interest rates, with maximum credit limits and flexible repayment terms.
Sources for Federal Student Loans
The federal government has provided student loan assistance for years, but the levels of awards have consistently posed a source for political debate. Two types of federal loans are administered: the William D. Ford Direct Federal Loan Program and the Federal Family Education Loan Program. The Direct Loan Program is administered directly through the U.S. Department of Education, while the FFELP is administered through a legion of student loan providers that act on behalf of the federal government.
The FAFSA
A critical piece of student aid information is the Federal Application for Free Student Aid (FAFSA). Widely recognized as the application through which borrowers apply for federal student loans, the document serves as the metric for many other forms of student assistance as well. Other sources that require or draw information from the FAFSA include:
- State funded loans, grants and scholarships often require applicants to have completed the FAFSA. In some cases the FAFSA is the application for other aid programs whether one is aware or not.
- Many colleges and universities require students have a completed FAFSA to be considered for campus-based scholarships and grants.
Types of Student Loans
Federal student loans include the ubiquitous Stafford Loans, Perkins Loans, and PLUS Loans for both parents and graduate or professional students. Each is specially designed to target specific, often overlapping, populations of college students. Almost every American student is awarded some level of funds, even those with poor credit.
Where federal funds leave off, alternative student loans pick up. Offered by student loan lenders and providers, alternative loans feature affordable terms as compared to traditional personal loans. Borrowers are urged to weigh the pros and cons of alternative loans. High credit limits seem attractive in the short-term, but when it comes time to repay, loans like these can drive borrowers to consider student loan debt refinancing.
Repaying Student Loans
Multiple student loans that all come due simultaneously are effective at undoing a new grad’s best laid financial plans. Thankfully almost all student loan sources now promote student consolidation loan programs. Essentially consolidation loans are nothing more than a slightly altered type of student loan. Consolidation gives borrowers flexibility to manage long-term student loans without sacrificing perks such as loan deferment options and flexible repayment terms.
Teaching the Student Loan Process
Student loan processes are best tackled one step at a time. College-bound students may receive valuable assistance with their FAFSA and student loans while they build a strategy for sensible college finance. Each fall local high schools and student loan providers ramp up standing room only seminars that debunk a confusing amalgam of student loan hype. Thanks to the current preponderance of free information the next generation of college applicants may not seem so ignorant to the maze-like student loan system.
