My daughter is heading to college in a few weeks, so it’s befitting to talk about student loans. Going to college provides an opportunity for self-exploration and personal growth. However, as you can see in the news, these formative years can have lasting negative financial consequences if you’re not careful. So let’s dive in!
What are Student Loans?
A student loan is a type of loan that is specifically designed to help students pay for their education. Student loans can be used to cover the cost of tuition, fees, books, supplies, and living expenses. There are two main types of student loans: (1) federal student loans and (2) private student loans.
Federal Student Loans
Federal student loans are loans that the U.S. government issues. They are typically the most affordable option for students, as they have lower interest rates and more flexible repayment terms than private student loans.
Private Student Loans
Private student loans are loans that banks, credit unions, and other private lenders issue. They typically have higher interest rates and less flexible repayment terms than federal student loans.
How to Apply for Student Loans—FAFSA
You must complete the Free Application for Federal Student Aid (FAFSA) to apply for student loans. The FAFSA form determines your eligibility for federal student aid, including federal student loans. Once you have submitted your FAFSA, you will be notified of your eligibility for federal student loans. You can then apply for the loans directly from the U.S. Department of Education.
Will I Be Required to Take Out Student Loans?
No. In fact, it is usually best for your future finances to avoid student loans altogether.
Can I Pay For College Without Student Loans?
Absolutely! You can apply for grants and scholarships to supplement your education—nearly $100 million in scholarships are estimated to go unclaimed yearly, and $2 billion in student grants go unclaimed. You can search for scholarship opportunities at websites such as myscholly.com. Another good resource for out-of-the-box ideas for going to college for free is the book Debt Free Degree by Anthony Oneal.
When Should I Start Applying For Scholarships and Grants?
I recommend applying for scholarships and grants before your senior year of high school. Generally, the more time and effort you spend applying for financial aid, the more likely you’ll get some. “Successful people are not gifted; they just work hard, then succeed on purpose.” — G.K. Nielson
