Personal Finance

Student Loans

The benefits to pursuing higher education and earning a degree cannot be overestimated. The average college graduate with a B.A makes twice as much as a high school graduate with no college degree. Those with college degrees report feeling happier are more satisfied with their lives then people who don't have degrees state in sociological testing. There is even evidence that college graduates live longer then their un-degreed counterparts!

But at the same time, the cost of college is raising at about twice the rate of inflation making peoples dreams of a college degree harder and harder to achieve. With the increasing tuition there is increasing competition for scholarships and grants that make college affordable for those who it wouldn't normally be.

The U.S.Government has many programs put in place to help students pay for school. Currently, there are three different types of student loans available at the Federal level.

They are:

Parent Plus Loans: These loans differ from other Government loan types because it is the parents of the student, and not the student themselves, who are the borrower. Parents apply for the loan the same way they would a private loan through their bank. Applicants are granted loans based on their credit worthiness, again the same as a traditional bank. These loans can be used to pay for tuition and for other educational expenses such as school fees, books, supplies, and lab fees.

Subsidized Stafford Loans: These loans are given to students based on their financial need for them. Low income students are given priority and larger sums to put towards their tuition. The Government pays the interest on the loans until the student has been out of school for a period of six months (either from graduating or dropping out) at this time the student begins to pay the loan off themselves.

Unsubsidized Stafford Loans: These loans are given to students regardless of their financial need. Unlike the Subsidized Stafford Loan the interest accumulates unpaid until the student is out of school for a period of six months. Like in the Subsidized version at this time the student begins to pay off the loan.

It is very rare for Federal programs and Government loan types like the ones listed her to completely cover all the costs of higher education. Because of this the vast majority of students pay their tuition and fees with a combination of scholarships, Government loan types, and private solutions such as an educational loan or personal loan through a traditional lender. Students will normally get a better interest rate on these private solutions to school expenses if they get a qualified adult with an established credit history to co-sign the loan for them.