In the current economic climate, affording a college education is becoming increasingly difficult for many families. Yet, at the same time, obtaining a college education is becoming more important to success in this ever-changing economic climate. What are your options to finance a college education?
Many students rely on scholarships, grants, and personal savings to pay for college. When these options are not enough, loans are a good alternative to cover the cost of a higher education. Unlike scholarships and grants, loans are borrowed money that must be paid back, with interest, after you have left school or completed your education. Every loan is different, though the largest variation between types of loans is the source of the money: loans can either come from the federal government (public loans), or from private companies and corporations (private loans).
Public loans have low interest rates set by the federal government, which are both fixed and capped. Conversely, private loans do not have fixed or capped interest rates, and therefore are often higher and are subject to change over time. Public loans also offer students a grace period after school during which no payments are due; private loans do not always offer this advantage. A final difference is that private loans are often credit-based, while you are eligible for public loans regardless of your credit history. For these reasons, public loans are often preferable to private loans.
The U.S. Department of Education advises all students to apply for a federal loan in order to determine your status (you can do this at the FAFSA website). If you do not qualify, you should then begin the application process for private loans, which are available through most banks and lending agencies. Remember – before you commit yourself to a particular loan, make sure you understand fully all of the terms, fees, and conditions associated with that loan.
To read more about student loans, and to begin the loan application process, visit the Student Loans section of the AGO website.
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