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Few families can say they have saved all the money a child will need to get a college degree. In fact, most students achieve their educational goals by combining several different financing options. These include savings, parental contributions, part-time work while studying at school, and various types of financial aid.
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If scholarships and grants are not enough to cover college costs, students and parents can borrow additional funds from the federal government, private, and nonprofit lenders. This can be a confusing process, so here’s a quick guide to explaining the options available to students and parents. The first step should always be to complete the Free Application for Federal Student Aid (FAFSA).
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You may think that financial aid only means scholarships or grants for students in financial need, but most students will receive some form of financial aid when they complete the FAFSA. It helps students qualify for grants, scholarships, work-study programs, and federal direct student loans.
Some loans are offered by the USA. Ministry of Education to help students achieve their higher education goals. Here’s a closer look at federal direct student loans available through the FAFSA:
When you do the math, a freshman can qualify for up to $5,500 in federal direct subsidized and unsubsidized loans. Combined with savings, scholarships, and other government financial aid, this is a good start for paying for college. In fact, finance professionals often recommend that students take advantage of all federally backed and unsupported loans that the FAFSA offers, as these types of student loans typically have lower interest rates than PLUS or private loans.
However, these loans have fees and credit limits. So, if grants, scholarships and subsidized loans are not enough to cover college costs, students and parents have other borrowing options – PLUS loans and private loans.
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Parent PLUS and Grad PLUS federal loans are available for families of undergraduate students and graduate or professional students, respectively. Interest will accrue while the student is in school.
However, just because PLUS loans come from the federal government doesn’t mean they have the same low interest rates as subsidized and unsubsidized loans. Therefore, it is in the best interest of the student and their family to review and compare student loan rates. In many cases, a private student loan can offer more competitive rates and fees than a PLUS loan.
Another thing to note is that many colleges will include a link in your student financial aid letter or offer to make it easier for you to apply for a PLUS loan. That doesn’t mean you should choose this option, but if you need some extra money for your education, it’s a good way to start doing your homework. Note that in many cases, private or alternative loans can have better interest rates and lower (or zero) fees to help students save.
The private or alternative student loan market has grown significantly in recent years. These loans are provided by banks, credit unions, online lenders, and the College Foundation, Inc. Issued by other lenders such as non-profit organizations. (CFI).
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Interest rates and terms can vary greatly from lender to lender, so you need to do some research and choose a loan that fits your needs. You’ll want to consider how much the lender charges as loan fees, whether they offer fixed or variable interest rates, and whether you’re eligible for the loan. For example, the NC Assistance Loan has no fees and has lower interest rates than federal PLUS loans.
The NC Assistance Loan is offered by the CFI, a North Carolina nonprofit that manages loans on behalf of the State Education Assistance Office. This means no demands from shareholders and increased profits. The NC Assistance Loan aims to help students in North Carolina.
By taking advantage of financial aid and doing your homework on the benefits of PLUS and private loans, you can save thousands of dollars in fees and interest over the life of your loans. We have additional resources to help you shop for student loans. And when you are ready, you can easily start the application process on our website.
College Foundation, Inc. is proud to offer NC Assistance Loans to students and parents to help bridge the gap in college cost. While a college education is a priority for many people, the ever-increasing cost threatens to make it financially inaccessible. If you don’t have enough savings to pay for college, check out loan options.
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Private college loans can come from many sources, including banks, credit unions, and other financial institutions. You can apply for a personal loan at any time and use the money for all your expenses, including education, room and board, books, computers, transportation and living expenses.
Unlike some federal loans, private loans are not tied to the borrower’s financial need. In fact, you may need to pass a credit check to prove your creditworthiness. If you have little, no or poor credit, you may need a loan taker.
Borrowers should keep in mind that private loans often have higher borrowing limits than federal loans. The repayment period for student loans from private lenders can also be different. While some will let you defer payments until you graduate, many lenders want you to start paying off your debt while you’re in school.
Federal student loans are regulated by the United States. Education Department. They tend to have lower interest rates and more flexible repayment schedules than private loans. To qualify for a federal loan, you must complete and submit your state’s Free Application for Federal Student Aid (FAFSA).
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The FAFSA asks a number of questions about the income and investments of the student and their parents, and other relevant questions, such as whether the household has other children attending college. Using this information, the FAFSA determines the Expected Family Contribution (EFC). This figure is used to calculate how much assistance you qualify for.
The confusingly named EFC has been renamed the Student Aid Index (SAI) to clarify its meaning. It does not specify how much the student must pay the college. It is used to calculate how much student aid an applicant is eligible for. Re-labeling will take place until the 2024-2025 school year.
College and university financial aid offices decide what aid to offer by subtracting your EFC from your cost of attendance (COA). The cost of participation includes the tuition fee, required fees, room and board costs, textbooks and other expenses.
To make up for the difference between the cost of a particular college and the amount a family can afford, the financial aid office prepares an aid package. This package may include some combination of federal Pell Grants, federal loans, and paid employment training.
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Schools can also use their own resources, such as scholarships. The main difference between grants and loans is that grants never have to be repaid (except in rare cases), while loans are repaid over time.
The federal government has developed regulations to assist students with student loans during the COVID-19 pandemic. The Coronavirus Relief, Relief, and Economic Security (CARES) Act, passed in March 2020, imposed leniency on all federal student loans. Biden has extended his administration until December 31, 2022.
The White House also announced other key provisions to help and protect student loan takers with their federal student loans. They include:
Federal courts have issued orders blocking the student loan forgiveness scheme. Therefore, from November 11, 2022, the Department of Education will no longer accept student loan write-off applications.
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There are also plans to make the university free and double the number of Pell grants available to students. The White House is also trying to hold institutions accountable for raising tuition fees to make higher education more affordable.
It’s important to note that these changes only apply to federal student loans, not private loans. Borrowers who need help with private loans should inquire about any conditions they may present to lenders.
The William D. Ford Federal Direct Loan Program is the largest and best-known of all federal student loan programs. These credits are sometimes called Stafford credits, after the previous program’s name. There are four main types of direct federal loans:
Note that the provision in the American bailout exempts all student loans from January 1, 2021 to December 31, 2025.
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These loans are given to students according to their financial needs. The state subsidizes the interest on the loan as long as the student works at least part-time. You pay no interest on subsidized loans until you graduate, and you have a grace period of six months after you leave school.
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