College tuition is increasing at an average rate of 3.4% annually. This is well above the rate of inflation, and students are borrowing money to pay for their education more and more through student loans.
If you think about it, getting $50,000 to pay for college (or more, depending on where you go) is no easy task even for someone who has worked for 15 or 20 years. So it’s very unlikely that someone who’s 18-21 years old and doesn’t have a solid career will be able to pull that money together.
A few of us do here and there, but the vast majority of students will end up with a student loan. If you do have to get a student loan, at least get the best student loan for yourself.
There are two primary types of student loans, the first are federally insured student loans, and the second are private student loans.
If you meet the financial aid requirements to get one, getting a federal student loan is almost always the best option. In order to qualify for a federal student loan, you have to apply for federal financial aid through the FAFSA. You can apply online for federal aid online through FASFA.ed.gov.
The FAFSA will determine your “expected family contribution,” and then try to make the rest up with grants and student loans.
How much can I get?
Depending on how much you make, how much you have in savings, how much your parents make, what assets your parents have, how many siblings you have, and a myriad of other factors will determine what type of student loan you can get.
If you get any grants awarded to you, take them. They’re free money!
After that, you’ll be able to get Stafford student loans which will be either unsubsidized or subsidized.
Subsidized loans simply mean that they will be interest-free as long as you are in school. Take the subsidized student loans first, and then the unsubsidized loans after that if you have to.
If you’ve exhausted the money that the government will give you in a federal student loan, you’ll have to come up with the money elsewhere. It is recommended that you either go to a more inexpensive school or work through college rather than getting another student loan.
If you have no other choice, you can look for a private student loan online.
Most major banks offer their own version of a private student loan. If federal aid isn’t available to you for whatever reason, you’ll have to get a student loan from a bank.
You’ll definitely want to do some comparison shopping when picking out a private student loan.
Go to about 5 different banks and then choose the one with the best interest rate and repayment terms. It’s not too difficult of a process.
In many cases, student loans are a necessary evil.
Many students will have to resort to some sort of student loan, and if you do have to get one to go to college, at least get the best one available to you.