photo credit: Mediatejack

Planning for higher education can call for the need of a higher education if you do not know what to look for. Knowing the types of loans available for the average student will help you fill the need for tuition and other school related expenses.

First, contact the Financial Aid office at your school to determine if they work with specific banks or companies. This will help speed the process along, and they can also let you know the requirements for the funding they have available. Many schools will send you to a few websites to search for grants and scholarships. This is fine. There are scholarships available for every career ranging from Groundskeeper to Doctor. Searching for these should be done before applying to school if you want to use this as a form of payment, as many have deadlines and paperwork that must be completed prior to award.

The average student will qualify for GSL or the “Student Loan” that most students talk about. There are two types available to the independent student: Subsidized and Unsubsidized. The difference between these two is that the interest is accruing while in school on the Unsubsidized loans. Most schools will try to apply for the Subsidized first, as this saves you money. If this is all the money you need, you are in luck. This means that your Subsidized loan will not accrue interest until your deferment period is up, or 6 months after graduation. If you still need funds, the Unsubsidized loan will be applied for, and it does accrue interest from the date you originate the loan. You can pay on the interest while you are in school to keep your payments down later, but it is not required. Always ask for In School Deferment, as this keeps you from making payments until you have graduated.

To apply for and receive these loans, there is no credit check, but a proof of need is required. This is where the Financial Aid office comes in. Fill out any FAFSA paperwork they may give you, or go to the official website and fill out your information. If you do this online, you will need to apply for and receive an education pin. This can take from as little as 5 minutes, to as long as 5 days to get this pin in your email. So if you plan on applying last minute, go to the Financial Aid office first. They will get your information processed faster than you can get it done at home. When filling out your FAFSA online, you will be required to have last year’s taxes available for your income. Personal questions will be asked such as one that wants to know if you have ever been convicted of a drug charge. This will not help your case getting a loan. Be truthful in all answers, as this is your education. You want as much as you can get. School is expensive and hard. Make sure you have all the money you need to pay for it all.

photo credit: lenifuzhead

There are aggregate limits for each type of loan. This means there is a cap on the amount you can get each semester, and overall per year. As an Independent Student, you must live on your own or not be on anyone else’s taxes, and not covered under your parent’s insurance. This means you get more on your loans than those who live at home and have a parent to help with tuition. For each year of school, the aggregate limit goes up. Your grace period is 6 months from the date of your graduation. Now if you leave school early or do not finish, your loan company can request the loan be paid in full immediately. So do your best to stick to your commitment to yourself and get your education. If you back out, if could cost you more than a few dirty looks from family members.

APR or Annual Percentage Rate is calculated into your loan at a national percentage when the loan is taken out. Most companies charge at a rate of 5% to 9% per loan. This means that the percentage is taken of the amount you request and then added to the interest. So if you get a loan for $2500 and the APR is 5%, then 5% is how much your interest will accrue at after your grace period. Don’t be discouraged, as the average payment for a $2500 loan after grace is around $38. Each company that offers student loans will have a loan calculator available. Use this, and it will give you an estimate of what your loan payment will be. Do not take this to the bank, it is used only as an estimate for your reference.

If you need more funding than the GSL will provide, you can always go with a Private loan. These are credit based loans, and if you do not have good credit or any credit, you will need a co-signer. A co-signer is someone who will put their name on the application with you, so that your loan can be considered. If you have bad or no credit and apply alone, there is a significant chance you will be turned down. Companies want to know they will get their money back, so they want someone with good credit. A parent or grandparent will help your credit score improve in the eyes of a lender. Don’t get upset if you cannot find a co-signer. There are many people that outright refuse to co-sign for anything. Would you want to put your name on a contract and promise to pay if the other person on that contract does not pay? That is what you are asking them to do, so choose wisely and realistically. These companies normally offer loans as low as $9000, and as much as $50000 depending on the career choice you have on file. Students who pursue medical careers get much higher aggregate limits than do other professions due to the cost of education. Always apply for the lowest limit you possibly can live with. Remember, you have to pay this back. And you CANNOT file bankruptcy on student loans. So there is no way out of it, you have to pay it back. If you fail to pay this back, on a yearly basis when you file taxes, Uncle Sam gets to keep your tax return to pay for all those loans. So it’s just easier to remember that this is your debt, and to be wise when choosing how to finance your future.

Michelle R. Hill