Every year student debt in America reaches an all-time high. College is expensive and it’s only getting worse, as tuition has been rising at a rate double that of the cost of living.
Figuring out how to pay for college isn’t easy. Students who choose to work while going to school usually see their grades take a slight dip due to extremely busy schedules. While a student loan for college is necessary and is considered good debt, students should understand that it is not their only option when obtaining funds for their college education.
Here we take a look at some of the various ways of paying for college for students.
Recommended College Resources
Most college students pay for college using a variety of resources. No matter which college financing alternative you choose, you should still fill out the FAFSA (Free Application for Federal Student Aid) as well as any financial aid forms required by your school.
Most students turn to some type of loan to cover the cost of their college tuition. These loans can be used not only for tuition, but for books and other educational-related expenses as well.
- Stafford Loan: These are loans that are available to most students regardless of income and credit history. They are either subsidized or unsubsidized depending on your financial need, which is determined by the government. If your Stafford Loan is subsidized, then the U.S. Department of Education will pay any interest that accrues on your loan while you are in school or while the loan is in deferment. If your loan is unsubsidized, then you, as a student, are responsible for the interest. These are not need-based loans, however there are borrowing limitations depending on your enrollment status and class (freshman, sophomore, etc.).
- PLUS Loan: If you are a dependent student, your parents can apply for a Federal PLUS Loan to cover the expenses of your college education. PLUS loans are credit based, therefore your parents should have a good credit history in order to be approved for these types of loans.
- Perkins Loan: These are low-interest loans available to students based on financial need. The U.S. Department of Education distributes funds to different schools for use in the Perkins program. The individual schools will then use the government formula to determine which students need the loans the most. Some schools will allocate some of their own funds to this program as well.
- Private Student Loans: When all other loan options have been exhausted, you can always apply for private educational loans. These can be obtained from any bank or credit union. These loans are not need based; however they are credit based. Therefore it is wise to apply with a co-signer if you do not meet the income and credit requirements.
Most private loans are based on one or more national interest rates, such as the Wall Street Journal Prime rate. Because private loans are based on the credit history of the applicant, an overhead will be charged and will vary by borrower. Students and parents with good credit receive lower rates and smaller loan fees than those with less than perfect credit.
Private or alternative loans have become increasingly popular for students as of late. This is somewhat unfortunate because these loans typically have higher interest rates and less favorable terms for the borrower.
Private loans may be used for any education-related expenses such as tuition, room and board, books, computers, and more. Private loans can also be used to supplement federal student loans when federal loans, grants and work-study are not enough to cover the cost of education.
When it comes to student loans, shop around and try and find the best rate. Use this tool to compare student loans.
Educational grants are funds that are allocated to students that meet the requirements of the giver. Some schools are given money by donors to use for their grant program. The federal government provides a Pell Grant to financially needy undergraduate students. Grants do not have to be repaid.
Scholarships for college students are financial awards based on a student’s academics or other requirements, depending on the benefactor. Student’s can apply for scholarships through companies, states, or even through their own college. These also do not have to be repaid and are not usually based on any type of financial need.
Federal Work Study
Have you ever wondered how that one student you know got that job in the school bookstore? It was most likely given to them through a Federal Work-Study Program. This is when a student is given a part-time job, usually on campus, and the earnings from the job are allocated to pay for the student’s tuition. These jobs are usually awarded to financially needy students first and then any and all other students if jobs remain available.
As stated before, you must fill out the FAFSA to be eligible for Stafford Loans, Work Study, grants and even some scholarships. Check with your school for additional paperwork regarding any of these alternative resources as well as a complete list of scholarships available.
Other Options for Paying for College
- GI Bill - A popular benefit provided by the military.