After you've decided to pursue a college education, the excitement of the doors your degree will open for you can be brought to a halt when you learn the sticker price of higher learning. Before you decide you can't afford to go to college, keep in mind that there are plenty of options to help you finance your degree, from government grants to private student loans.
The best place to start is by filing the Free Application for Federal Student Aid (FAFSA), which can qualify you for grants, work-study and other forms of student-aid. By filling out the FAFSA, you can also find out how much you can take out in subsidized and/or unsubsidized federal loans such as the Stafford loan. Federal education loans have fixed interest rates and are likely to cost less than variable-rate private loans, so it is best to explore your federal loan options first.
While government student loans are great, the amount you can borrow is limited. Often, you can't borrow enough to pay for expensive programs and living expenses. Also, government loans don't always work well for nontraditional students - if you are going to school part-time or not currently enrolled in a degree program, you probably don't qualify for a Stafford student loan. Not to mention, there are many additional expenses involved when pursuing a graduate degree, such as finding an internship or residency or taking the Bar exam, that federal loans won't cover. That's where alternative loans come in to play.
It is estimated that private student loans will surpass federal student loans in 2025 if current trends continue. The flexibility offered by loans from a bank or other lending institution sometimes outweighs the risk of variable interest rates and lack of security from the government. However, there is definitely competition for non-federal education funding. A minimum credit score of 650 is required by most private student lenders. If you have bad credit or need to clean up your credit score to get a private loan, get a free copy of your credit report from any of the three major credit bureaus -- Experian, Equifax or TransUnion -- to check for mistakes and pay off outstanding debts, starting with any accounts that have gone into collection first.
When you take out a private student loan, you should shop around, just as you would with any type of loan. You need to consider the interest rate, repayment options, and length of the grace period of the loan when talking to different lenders. Also take into consideration the reputation of the lender.
Use this list of private student loan comparison sites to find out if your lender is giving you the best rates: http://www.finaid.org/loans/loancomparisonsites.phtml.
When you take out your private student loan, be careful to only borrow what you need for college and living expenses. Most banks will let you borrow much more than the minimum, but remember you will be paying it all back plus interest after graduation. Also, consider making monthly payments while you are in school to avoid accruing costly interest. Even if it means a little extra work, it can save you a lot of money in the future.
Contributing Blogger Source: Christina Leonard
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