subject: Loans For School: Finding The Right Student Loans [print this page] If you, or someone in your immediate family, are independently wealthy, you might as well stop reading right now. If you're like the majority of students, though, finding good loans for school expenses is vital once you've used up savings, grants, and scholarships.
In a moment we'll discuss some reasonable choices among available loans for school. But first let's eliminate some really bad choices that some misguided students have made.
Some Poor Choices
First, something we all seem to both love and hate: credit cards. True, they are quick and convenient. Also they can help you out in a pinch. The fact is, you need them just to function in today's economy. Try renting a car or making an online purchase without one! But seriously, for financing your tuition? Only consider them if you have a rock-solid plan to pay them back. Otherwise, credit cards can bury you with oppressive interest rates, late fees and over limit penalties.
Check cashing stores are another really terrible source of money. The interest rates these places charge are enough to choke a horse! Seriously, if you use these often enough you may never recover. Be honest with yourself, if you don't have the money right now, what makes you think you'll have it in 2 weeks? Keep away from these places!
What about gambling? There are so many appealing games: cards, roulette, slots, dice, horse/dog races, and of course the lottery. For the casino owners, gambling is a lucrative business. For you, though, gambling is just a really bad habit to get into. It won't pay your tuition. Don't waste your time (and money).
Then there are title loans, where you sign over the title to your car as collateral for the loan. Expect to get just a fraction of your car's value, while paying a high rate of interest. Many borrowers then find they are unable to repay the loan, and lose their car. If you are willing to give up your car for much less than its value, why not just sell the car and bank all the cash? At least you'll earn some interest instead of paying it.
Some Better Choices
Once you have exhausted your possibilities for getting scholarships or grants, you'll need to uncover the student loans you'll need to cover all the rest of your expenses. So let's have a look at some of the more consumer-friendly types of loans for school.
We can place these into two categories: private student loans and government guaranteed loans. Private loans are funded by banks and other institutions. These loans generally carry a higher rate of interest than the government loans. Every lender has its own rules. You might need a cosigner, and you probably will need a fairly high credit score to qualify.
Government guaranteed loans for school usually offer lower rates, longer payback schedules, and the option to consolidate loans after completion of college. A consolidation loan may lower the overall interest rate, too.
Among the government loans are three categories: Stafford loans, Perkins loans, and Grad-PLUS loans. Grad-PLUS is short for Graduate student and Parent Loans for Undergraduate Students.
These three have some various rules, but also share several similarities. At ExploreStudentLoans.com we discuss each of these loans in greater detail. One thing they do have in common, though: you must show a financial need in order to qualify for the loan program. For all of these, you will need to submit a FAFSA (Free Application for Federal Student Aid) form to verify your qualifications.
Should You Get a Scholarship or a Student Loan?
Sorry- that was a trick question. The correct answer is, if possible, get both. A scholarship or grant is far better than a loan. You just might be surprised at how much you can get in grant money that you'll never have to repay. Loans for school can fill in the gaps when you can't get enough of the free money. Try to keep the loans to a minimum, though, and pay them off as rapidly as possible to minimize your interest costs.
A final word of caution is in order here. If the starting pay in your chosen career is relatively low, try to avoid taking out more loans for school than absolutely necessary. If that is the case, you may want to consider working part time to "pay as you go" for your expenses. Don't be like some students who graduate with such a heavy debt load that it severely limits their future. If you practice frugality now, you'll thank yourself for it later.
