Beyond Federal Financial Aid
When it comes paying for college, you may apply for federal financial aid. The problem may be that when you receive the award letter, it’s simply not enough to cover everything. With a college education comes the expense of covering tuition, books and room and board for a four-year period, which means the costs can really add up. If your federal financial aid is falling short of the amount of money you need to pay for your college education, you may have to turn to applying for student loans from private institutions.
Where and How to Find Student Loans
- Bank. Your first stop for student loan information should be the bank where you or your parents have an account. Having a relationship with the bank may make it easier for you to qualify for a student loan. It may also help you to get a better interest rate, repayment terms and conditions than you would from a bank where you don’t have an existing relationship. Some lenders may also ask you to open an account with them when applying for a student loan to help with the approval process.
- Private loans. Another source of college money is obtaining a loan from an individual, such as a family member, rather than applying for a bank student loan. In a private one-on-one situation, you can negotiate the amount, interest rate and payment arrangements with the person loaning you the money. This means you can usually get a better interest rate and more favorable repayment terms than you may get when going through a traditional student loan program. You should treat this loan as you would any other loan, making sure that the agreement is in writing and that you both sign a promissory note that details the terms of the loan.
- Comparison Shop. Obtaining a student loan is a major financial decision. This means that you should shop and compare your various options before choosing the one that is the most beneficial to you. It’s wise to compare at least three student loan options to compare the differences. You’ll want to compare the interest rates charged, the repayment terms, the term of the loan and any other options available with the loan such as deferment and loan forgiveness. This is important because you’re not sure what the future holds for you in the way of employment and income after you graduate from college.
After you’ve found out what is available for you in financial aid from the U.S. Department of Education’s FAFSA program, you may need to cover the shortfall with other sources. Private student loans may be the way for you to pay for college expenses that are not covered by other means.