Finding the Right College Loan

The cost of college education continues to grow, but it seems as though higher education is necessary for future students to succeed. Students and parents are often confused on how to finance student pursuits in college. Parents have a number of options available to them like private loans, federal loans, saving beforehand, paying out of pocket or receiving scholarships and grants.

Most students will not receive scholarships or grants that will cover the entire cost of college. In a lot of instances the scholarships and grants are often only applied to tuition, so other costs like housing and textbooks become a financial concern. Grants are often limited to undergraduate students as well. Some colleges will be provide grants to secure enrollment too. Most scholarships are merit based and it is difficult to secure one later in your college experience.

Students and parents often have limited knowledge of the issues that exist with federal and private loans. Parents and students often can’t pay for all of the college costs out of pocket and few have saved for this event too. Parents and students need to understand the limitations of federal vs. private loans.

Federal Loans:
Federal loans require students to fill out the FAFSA form. Undergraduate students require their parents to fill out the FAFSA with them, which includes their tax information too. Based on the information that is provided students can be denied the assistance they actually need. Students will need to declare an appropriate estimated contribution in order to have the best chance of receiving aid.

Positives of federal loans include that they do not require a credit check to be secured (for most federal loans). This allows young individuals with no credit to receive a loan without a cosigner. Federal loans also offer students some strong remedies regarding repayment upon graduation. Federal loans often offer longer periods of payment deferment for a variety of reasons. Federal loans often have lower rates than private loans (usually around 2 to 4%).

Negatives of federal loans include the limitations on the amount you can borrow. If you are pursuing a degree at a college that is extremely pricey you may run out of federal loans within your first semester of an academic school year.

Private Loans:

Positives of private loans include that you can in theory obtain any loan amount that you need. For example, if you need a student loan for $20,000 one semester you can in theory take out a loan for $22,000. This allows you to cover all costs associated with your schooling that will be limited with federal loans.

Negatives of private loans are many. The first negative is that most students can’t obtain a private loan on their own due to no credit history. This requires a cosigner that often leads to issues later on if a student struggles to secure a job. Private loans also have limited deferment and forbearance options, usually limited to about a year. That essentially means if you can’t pay back your loans within a year your only option is to go back to school to receive an in-school deferment because private loan companies don’t care about your financial situation and won’t give you a payment plan based on your earnings like federal loans will. Private loans can also be predatory with their rates (usually around 6 to 8%) which far exceed most student loans.

One tool that has been found useful is Simple Tuition. Simple Tuition provides students and parents the opportunity compare loan options based on their college year and area. Simple Tuition also provides information on choosing a college, scholarships and repayment options for students pursuing college education. For more information on Simple Tuition please feel free to click below.

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About Matthew Marino

Matt Marino is a NJ certified business and computer teacher. Marino has ran the web design and media company Franchise Inc. Media and Bambino Enterprises Web Design since October 2003. Matt founded the non-profit Foundation for Academic Advancements in Educational Technology in October 2014. Matt also serves as a Freelance Contributor for Seeking Alpha, and Nasdaq. Since January 2016 Mr. Marino has served as an adjunct professor at Monmouth University.

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