Pros of grants
- It’s free money-duh.
- They do not need to be repaid (aka no debt).
- Most grants are need based.
- Typically only one application, the FAFSA, needs to be filled out to apply for various grants.
Cons of grants
- They are a limited resource, and they can run out.
Student loans
Student loans are much like any other loan, except that they are used to pay for educational expensespared to scholarships and grants, college loans can get a bit more complex. And while loans can be a good option for paying for college, you need to understand what they entail and be https://worldpaydayloans.com/payday-loans-ny/middletown/ conscientious in your borrowing. Otherwise, you might take on a financial burden you really can’t handle. Always remember that loans come with interest (which can add up quickly) and payments when you’re done with college and out in the real world. And if you don’t make your loan payments, things can quickly take a turn for the worst.
There are basically four types of loans you need to worry about: federal need-based loans, federal non-need-based loans, state loans, and private loans. If you need to borrow money for college, federal- and state-backed loans tend to be your best bet, because they have fixed interest rates, lower interest rates, and more favorable repayment options, including the ability to make income-based payments. If federal or state loans don’t cover all of your educational expenses, you can turn to private loans to fill in (reasonable) gaps.
Most importantly, you need to understand what you’re getting yourself into with any student loans: how much you’ll be paying back each month, how much your payments compare to the average salary for your intended profession, what the terms of your loan entail, etc. It’s a lot of heavy, adulty information you (and your family) should research before you apply for any student loans.
Federal need-based loans
Federal loans are the most commonly sought by students because they usually have flexible repayment terms and relatively low interest rates. They are funded through the US Department of Education, and some of the popular programs include the Stafford and the Perkins loans. You need to file the FAFSA to get these loans, and they’re awarded based on you and your family’s financial need. They are typically awarded to more needy families. Federal Perkins Loans are awarded to the most financially needy families, distributed via the university to the student directly (not the parents). The maximum amount you can get in Federal Perkins Loans as an undergraduate is $5,500 a year and $27,500 total. If you take out a Federal Perkins Loan, expect to pay about 5% interest. You can also get Federal Direct Subsidized Loans. Subsidized loans defer interest until after you graduate. (This saves you money. Yay!) The amount you can borrow also increases year after year, and undergraduate dependent students can borrow a total amount of $23,000 in subsidized loans.
Federal non-need-based loans
You can also get Federal Direct Unsubsidized Loans, which do charge interest while you’re in school. You can borrow up to $31,000 in federal loans as an undergrad; again, no more than $23,000 can be subsidized (see above!). Your parents can borrow up to the full cost of your college attendance (as determined by your school) with Federal Direct PLUS Loans, assuming they do not have an adverse credit history.
State loans
State loans are offered by a state’s department of education. You can see what may be available in your state on the US Department of Education’s website. State loans vary in how much you can borrow and in application requirements.