With tuition rates skyrocketing, the chief concern of many is figuring out how to pay for college. The high cost of attending college is also ruling out parents as an option for financing an education. While many parents have the ability to help pay for college, it is rare to be able to pay for it out of pocket, especially if there is more than one college age student in the family.
Scholarships and grants can also help pay for your education, however these can be difficult to obtain. The most popular way to finance a trip to college is through the use of student loans. There are various types of student loans and loan providers that can be used to get your college paid for, however they come with both pros and cons. Unfortunately, these loans need to be paid back at some point, and those payments put your financial independence at risk.
The two most popular types of loans that are used are federal and private loans. However, many find it difficult to repay these loans after they graduate. Here is an overview of the benefits and drawbacks of federal and private loans, as well as some tips to help keep financial independence after graduation.
Federal loans are the most common way that students finance their education. One reason they are so popular is because they don’t require a credit check to obtain. Another pro is the interest rates. Federal student loans carry a low, fixed rate. This could help when it comes to paying the loans back. Also, the typical student loans offer flexible repayment plans that can fit your budget; for the most part loans don’t have to be repaid until 180 days after graduation, allowing for plenty of time to obtain full-time employment.
One drawback however of federal loans is that they require you to file for student aid with the federal government. The combined income of your household, and other factors determine how much money you can receive, many times they don’t pay for the full cost of school. Another minor drawback is that loans have to be applied for every year. Finally, federal student loans are limited in what they can be used for. These loans can be used to pay for tuition, books, and housing, but not other education-related expenses.
While federal loans are the easiest loans to attain for many reasons, they usually do not cover the full cost of college, and are limited in how they can be used. In order to fill those gaps many turn to private loans.
Additionally, without federal filings the fuds from a loan are processed and transferred much quicker than federal loans. Also, unlike federal loans private loans can be used for a multitude of education related expenses.
Although, these loans have their downfalls as well. First, private loans require a credit check, and even if approved for a loan the rate is usually much higher as most college freshmen don’t possess great credit, or any credit at all. These high interest rates can push your further into debt if you aren’t careful about what you spend. Finally, private loans prove to be less flexible as far as repayment is concerned, making these loans more suitable for complimenting your federal loans.
Being Financially Independent:
While it can be easy to think you’ll just get student loans to pay for college, the process is many times not that easy. With all the different types of loans and loan providers, obtaining the money to pay for an education can be confusing and frustrating.
Luckily, there is no shortage of resources for those who are trying to navigate these difficult waters. Resources like SimpleTuition compile all the information you’ll need in one place. Sites like this offer explanations of the different loan options available for different types of students. Knowing exactly what your options are for financial aid is the first step to obtaining financial independence after college. In addition, being responsible with your money after college and making your loan repayments the first priority, will cut down on the time it takes to pay off your education.
Paying for college can seem a daunting task, however those that understand the options and what is being required of them have an easier time with this. Federal loans are easy to get, and cover many of your expenses for school. However, many times private loans are necessary to make sure that you have everything you need. The biggest key is not borrowing more than you need. Being smart about applying for loans, will put you on the right track once you’ve graduated.
Jayson @ Monster Piggy Banks says
I am thankful that I had a student loan when I was in college. Luckily, I paid it off after two years. Nice article Pauline.
My son is awaiting result of his student loan application. Hopefully, he will be able to get financing from the government. Now t hat I am reminded, I will have to advise hom on how to be financially independent and pay off his student loan as soon as he graduates. Nice article.
Mike Carlson says
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