Types of Student Loans and Funding Options for College

If you are already a student, or just planning to become a college student this year, there are lots and lots of funding options available for you-and you’re going to need them because college is expensive these days. The college board estimates the average cost of attending four-year colleges in 2008-2009 was $6,585 for a public school, and a whopping $25,143 for private schools. But getting a college education can be worth it.
To pay for college, you can get a student loan, or you can get grants. Realize, however, that anything that is called a “loan,” you will have to pay back over time. Anything that is referred to as a “grant,” is a gift, and you do not have to pay those back. If you can, get grants to pay for your education before you get student loans.

Grants usually come from government. The most common grant is the Pell Grant, which is based on your income levels. When you fill out the federal FAFSA form, the financial aid office will determine if you are eligible for a Pell Grant. If you are eligible, you simply accept it with your signature and your school’s financial aid office will receive the funds directly.

Scholarships are provided by various civic organizations. Each organization has their own criteria on who is eligible for the scholarships. Like grants, these are gifts, and you do not have to pay them back. There are tens of thousands of college scholarships given out every year, so be diligent in your search for these.

Student loans come in many forms. The two primary loans come through government and by filling out a FAFSA form. Often these will be referred to as Stafford loans. These are either subsidized or unsubsidized. The difference in these is vast, because if you have a subsidized loan, the government will pay your interest fees while you are in college. With an unsubsidized loan, while you are not making payments while attending college, the interest continues to accrue on your loan, making your education even more expensive. If you do not fill out a FAFSA, however, few colleges will allow you to even apply for these types of loans.

Loans that are not processed nor given by the government are called private loans. Typically these are used when you cannot find enough funding through grants, scholarships, and federal loans. These loans are typically much more expensive than federal loans, so these should only be used as a last resort to fund your college education. Most private lenders do not care about your FAFSA and instead are concerned with your ability to pay back the loan. Many private loans also need to be paid back immediately, instead of after you graduate.