How to Fund Your Education with Student Loans
Interested in getting a degree in beauty education but worried you will not be able to afford it? Student loans can help you pay for your education, making it more financially manageable to get that beauty degree.
Student loans allow you to borrow money for your education, with the expectation that you will repay those loans with interest after the completion of your degree. Loans are offered through a variety of organizations, and can be used for such expenses as tuition and fees, room and board, books, supplies, and transportation. This article explains the basics about the loans that are available to students.
Federal Student Aid – State Student Aid – Private Loans – Key Links for Student Loan Information
Federal Student Aid
The Department of Education's federal student aid programs are the largest source of student aid, according to the DOE's website. Loans granted by the DOE are typically low-interest loans because the rates are set by the government and not private institutions. To be eligible for government aid, you must usually demonstrate financial need, be a U.S. citizen or eligible non-citizen, be working toward a degree or certificate in an eligible program, and show you are qualified to obtain a post-secondary education.
The DOE offers several loans:
- Stafford Loans come in two different forms: subsidized and unsubsidized loans. Subsidized loans are need-based. Interest will not accumulate while you are still in school if you are enrolled at least half-time and there is a grace period and authorized deferment options. Unsubsidized loans are not need-based. You are responsible for all interest that accrues on the loan, including while you are in school. Students, no matter what the financial need, are all given a limit to how much money they are able to borrow in the form of a Stafford Loan.
- Perkins Loans are the other most common type of aid given by the federal government. This is a subsidized loan given only to those with the most extreme cases of financial need. Though the federal government is the ultimate lender for a Perkins Loan, colleges and universities are actually the ones that disperse the money to students. Perkins Loans are probably the best loan out there because the interest rate is fixed at 5% and it is completely subsidized. Like the Stafford Loan, the amount of money given through a Perkins Loan is limited.
- Parents also have an option for paying for their children's school. The federal government offers a PLUS Loan, or Parent Loan for Undergraduate Students, with a fixed interest rate of 8.5%.
To determine what type of government financial aid you would be eligible for, access the Free Application for Federal Student Aid form online at FAFSA. Besides the DOE, several other federal organizations offer student aid for specific purposes. Those include aid for veterans and their dependents, and students who want to earn funds in exchange for community service.
State Student Aid
Many states provide financial assistance to students attending universities and colleges located in their state. To find out if your state offers student loans and to determine if you are eligible, visit the Education Resource Organizations Directory.
Private Loans
Private loans are also available to students once they have maxed out the amount they are eligible for through federal loans. Private loans are obtained through private lending institutions, such as banks and companies like Sallie Mae. To be eligible for a private loan, you must be enrolled at least half-time at an eligible school, be a U.S. citizen or permanent resident, and pass a credit check.
Private loans may cost more in the long run because of higher interest rates, but they are still a worthwhile way to finance your education. Loan amounts and repayment terms vary depending on the lender. When deciding which private loan you would like to apply for, you should consider the overall cost of the loan, the required credit criteria and approval rate, the monthly payment, the lender's policies on grace periods and deferment, and the reputation of the lender.
Student loans are legal obligations, and they must be repaid, even if you do not complete your education. Most lending institutions will grant you a grace period of six to nine months following graduation when you do not have to repay any of your loans. The time you will be given to repay your loans can vary from 10 years to 25 years, depending on the lender and repayment plan you select. If you are unable to repay your loan amounts due to economic hardship or unemployment, you may be able to temporarily defer payments on your loan. Your loans may only be excused in extreme circumstances, such as death, permanent disability, or bankruptcy.
Key Links for Student Loan Information
There are a plethora of online resources designed to make the loan research process easier. A recap of some of the most useful student loan resource sites is listed below.
FAFSA: www.fafsa.ed.gov
Federal student loans have the lowest interest rates, so the best place to start when looking for a loan is the U.S. Department of Education website, fafsa.ed.gov. This site has information about federal loans as well as an application that will forecast your expected family contribution, which determines how much federal aid you will receive. Make sure you are on the .gov website—there are many lookalike .com websites that request payment.
Federal Student Aid: www.studentaid.ed.gov
This is another helpful Department of Education website. It has information on loan types, repayment plans, and repayment deferrals, and other useful topics. It also has a useful application, the Financial Aid Wizard. Like the FAFSA forecaster, the Wizard allows you to estimate your expected family contribution and the amount of federal aid you will receive, but it will also remember your colleges' financial aid application deadline, autofill data in the application forms, and help you with scholarship searches.
College Scholarships: www.collegescholarships.org/loans
Collegescholarships.org has an overview of different lenders as well as basic information on many loan-related topics, such as loan types, consolidation, repayment, forgiveness, and tax deductions. Unlike many student financial aid websites, College Scholarships doesn't require you to create an account, which makes it a good source for fast information.
Sallie Mae: www.salliemae.com
Sallie Mae is the largest provider and servicer of government guaranteed student loans (Stafford, PLUS, etc.) and one of the largest providers of private student loans. Sallie Mae was once a government sponsored entity, but have been privately owned since 2005. Their website has useful information on loan types, application processes, and repayment plans. Like most lenders and servicers, Sallie Mae has a lot of online services for students who borrow from them.
Other major lenders include Citibank Student Loan Corporation , Chase Bank , Key Corp , Wells Fargo Bank , Nellie Mae , and the Student Loan Funding Corporation .
The Office of the Ombudsman: www.ombudsman.ed.gov
The ombudsman helps resolve loan disputes and solve problems with federal student loans. The ombudsman website is a good place to look if you have any questions about your loan.
Article Resources:
