Many students have only a limited amount of money set aside for college, and even if they qualify for scholarships and grants, the amount they receive from those resources still may not cover the entire accumulated cost of classes, books, technology fees, and college housing. Thankfully, those aren't the only options available to students. Those who need additional financial aid for college can apply for student loans, which are sums of money that students can borrow from the government or private financial institutions.
Getting a Loan
As with some scholarships and grants, getting a loan can be as simple as filling out paperwork. All loans, including federal loans and private and personal loans, start with a loan application. After students provide personal information, loan companies will investigate their backgrounds and financial standings. Then, they will determine whether or not the student is a high or low financial risk, after which they will offer a loan to low-risk clients. Each lender will have different guidelines for determining to whom they should lend their money and how much money they should offer.
If you're having trouble being approved for a loan, consider getting a cosigner. A cosigner can take joint responsibility for your loan, which can help you get approved. There are also options for parents to take out loans on behalf of their students, which is another helpful option for students who are struggling with loan approval.
Repaying a Loan
Unlike scholarships and grants, loans consist of borrowed money, which eventually needs to be paid back to the lender. This means that loans typically accumulate interest over time, although the rate will vary with each loan. Some loans, like federal loans (including Stafford loans), may be offered to students on a subsidized basis, which means that the student will not be charged interest while he or she is attending school. Other loans are unsubsidized and accumulate interest regardless of the student's academic status.
It is best to try and repay the loan as quickly as possible to reduce paying too much in interest. Some government loans have a grace period, which is a time frame after graduation during which students do not need to repay their loans. However, if you are in a position where you can pay during the grace period, it's better to get a head start and begin the repayment process. Although it can be difficult for entry-level professionals, repaying more than the monthly amount required is a good way to pay off your loan quickly without accumulating too much interest.
Additionally, students who have borrowed from the federal government may be eligible to have their loans forgiven, canceled, or discharged. Typically, this applies to teachers, public service officials, and major, life-changing events. To learn more, visit the Federal Student Aid website.
Student Loan Benefits
Taking out a loan can be a difficult decision. You may be wary of accumulating debt so early in your life or taking out money now when you don't know what your financial situation will be later. Keep in mind, however, that student loans do have some benefits. They can help you pay for college, which will give you the time to focus on your studies in lieu of finding a full-time job to pay for your tuition. College loans also help you build credit, which can assist you later on in life, such as when you are looking to buy a car or a home.
Before taking out a loan, consider the cost of your education and the resources that are available to you. If you think that you can handle the financial responsibility of a loan, apply for one — but make sure you have a plan in place first. That way, when it does come time to start making payments, you won't be caught by surprise.