As you prepare to head off to college, you may be crunching numbers and trying to decide whether or not you can actually afford to go. If you worked throughout the summer, you may have a little bit of money saved up, but in reality, college is expensive and it is unlikely that you have the entire amount lying around to use.
When it boils down to it, you may need to start looking for ways to fund your college dream, but before you jump right to student loans, there are other options to consider and steps for you to take to ensure you get the most bang for your buck, because after all, you have to repay loans.
Your First Step: Exhaust Free Money
Before you head for the student loan line, you want to make sure that you exhaust all of your free money options, often referred to as gift aid. This type of funding is provided to you and you do not have to pay it back. Typically, you will need to apply to receive is aid and it is not just handed to you.
One of the first options is scholarships. These are awarded to college students or future college students to attend school. The amount of the award will vary depending on who is issuing the awarded amount. There are thousands of scholarship opportunities for all types of degree choices. To receive one, you need to apply for it and provide all documentation requested and of course, have good grades and meet the criteria. Scholarships can be awarded as many times as you qualify for them, so don’t give up after just one or two. Aside from the popular, nationwide scholarships with tons of applicants, be sure to check out niche scholarships that are less competitive.
Grants are another option for free money that should be exhausted before you look for loans. There are a few different types of grants available including the Federal Pell Grant. Grants are usually awarded to students who demonstrate a financial need for them and you need to fill out the FAFSA to be considered for grants. If you are qualified, you will receive the aid and it does not have to be paid back.
Your Next Step: Talk to Your Parents and Relatives
The next step after you have applied for scholarships and grants is to start talking to your parents and relatives. You never know who may have some savings they want to part with and you never know who may be ready to help you.
Take anything that you can get to help pay for school because $100 may not seem like too much now, but that is $100 plus interest less than you will need to pay back later down the road.
Another great idea is to ask your relatives if instead of gifts for holidays and events, that you receive money toward your education.
Your Third Step: Federal Student Loans
Federal student loans are available to all students and you do not have to show a financial need to receive them. In fact, there are two different types – subsidized and unsubsidized. Unsubsidized loans do not require any type of need, but subsidized loans do require a financial need. Students can receive one or the other or both.
You should use federal student loans when you have exhausted all other options above. You do have to pay these loans back with interest and most repayment plans are offered in 10-year or 20-year plans.
Federal student loans do offer flexible terms, which allow you to apply for programs that base your repayment amount on your income and situation.
Your Last Step: Private Student Loans
Private student loans are offered through private lenders and not the federal government. You typically need to have an excellent credit score and good income to receive these loans. If you do not, you will need a cosigner who meets the requirements.
Private student loans should be your last choice because while they do offer decent interest rates, they do not have flexible terms like the federal loans and you must start paying them back immediately, even while you are in school.
It is important for you to explore all options for aid before you jump in and apply for loans. There is a lot of free money that is left on the table that many students do not know about. If you follow the steps in order above, you will find that you can get a lot of your education at no cost to you.
I wish I had known this going into college! I was too afraid to ask what was out there.
Elle @ New Graduate Finance recently posted…How Much Money Do You Make?
My brother got a scholarship grant to study abroad. He is entitled to a full scholarship and wouldn’t pay a dime. All expenses are paid. He is just so lucky!
Jamie recently posted…Is Your Business Making A Profit?