College is expensive. Luckily, there are a lot of different types of financial aid to suit a wide range of needs. Knowing what kind of financial aid is available, who offers it, and how to get it could save you thousands of dollars, and years of paying off student debts. This guide will help you navigate everything financial aid has to offer and help you find options.
Three Main Types
There are three main types of financial aid. There are loans, and then there’s essentially “free money.” Then there’s sweat money. Each of these three types has its set of pros and cons.
A loan is an agreement between you and a third party. When it comes to student loans, this third party could be a bank, the government/government organization, your parents, or someone else from your life.
Specific Types of Student Loans
Government Funded Loans: These loans are usually referred to as Federal Loans. These are when the government loans you money so you can get a degree. They include:
- FAFSA: A government organization which provides many different types of need-based, and merit-based loans.
- Parent PLUS Loans: Loans that undergraduate students, graduate students, and parents of undergraduate students can apply for to cover the cost of tuition and other college expenses.
- Federal Student Loans: Loans granted to students by the Federal Government to cover the costs of tuition and other needs.
Pros of Loans
Loans are fairly easy to obtain, and you can usually obtain enough money to get you all the way through college.
You end up paying back more than you borrowed. Loans aren’t just borrowed money you hand back after a few years. The government and private credit unions, banks, and loan companies make money off of interest and capitalized interest.
Capitalized interest is when any unpaid interest gets added to the principal of the loan (the original amount you borrowed). So, when the money from your student loan gets sent to your school, it starts building up interest. After a set amount of time passes, your loan falls out of the grace period, and the interest of your loan gets added to the principal, thus creating a new principal that gathers interest.
There are thousands of scholarships and grants available. These are set amounts of money created by organizations, charities, schools, individuals, and more to help students pay for college. There are hundreds upon hundreds of scholarships and grants available worth anywhere from $100 to the full cost of your college education.
They are essentially gifts. You do not have to pay them back. All you have to do is apply, and then use the money to pay for school.
They are not easy to come by. You usually have to apply for scholarships and grants and they come with hefty requirements. Each scholarship and grant have a unique set of requirements and recipients are selected based on adherence to those requirements. Most people are unable to obtain enough scholarships and grants to cover all their expenses.
A part-time or full-time job is one of the toughest ways to pay for school; however, it comes with major rewards.
All the money you make is yours with no contingencies other than showing up and doing your job. A job also helps you build vital work experience that will be a benefit in life after college, and it gives you a better credit score.
It is tough to work and go to school. Schedules are always being juggled, and hefty sacrifices must be made to keep both your work life and your school life afloat. You also might not make quite enough money to cover all of your bases.
No matter what, your education is worth the sacrifice. It is ok to use a combination of financial aid to pay for your degree. Whatever your decision, study it out, look it up, and weigh the pros and cons. A little forethought and preparation can help you graduate with the most financial freedom possible.