College is an extremely exciting part of your journey as you prepare to venture into the exciting world of freedom, unparalleled knowledge, widen your social networks, and pursue your dreams. Whether you’re headed in for a humanities and art major, or you’re more on the STEM side, it’s also very likely that you’re among the vast majority of college students that are relying on loans to get them through. Read on to find the truths about financial aid and assistance everyone should know.
About financial aid, there is assistance exists in the form of loans, grants, scholarships, which are some of the ways students can work toward. You can combine them to significantly cut down on costs of going to college and the things you’re paying for, including tuition, materials, transport, living costs, etc.
But before you sign that binding contract and take on hefty loans that you will be paying off for years, here are some things worth knowing and understanding:
Anyone can apply for financial aid
Financial aid in the form of loans is often only available to individuals below a certain income threshold, but that shouldn’t deter you from filling out applications. While you might not be granted the federal loan, if needed, you can apply for private loans too.
Despite income thresholds, not all families can afford to pay for certain schools, which is why many students forgo their first-choice colleges; don’t hold back from applying because it may help you.
This is especially true for families with multiple children attending college, the price of the college you’re applying to, and several other factors apart from just the income and family contribution. Plus, several loan applications are free anyway, so what do you have to lose?
It’s not ‘free money’ by any means
While scholarships and types of grants, and even aid might be gifted to you, more often than not, financial assistance is provided as loans. And these loans will need to be paid back.
Many people make the mistake of assuming that their loan can default eventually, but that significantly hinders your financial health and security. It can affect your credit score for several years, preventing you from having access to credit cards, from buying a house, car, or major assets, from traveling, from even holding down a secure and well-paying job.
The risk of default is far too great to take on without consideration of the consequences. This means your loan should also reflect your willingness and ability to repay it, factoring in expected income after graduation, assets in possession, the true to life cost of living (please don’t take vacations with your student loan money), and other factors.
Overborrowing leads to overpaying in the form of a hefty accumulation as well as interest. There is a lot of debate around what counts as overborrowing, so you should be in the clear, but don’t take what you can’t (safely) repay within a given period.
Federal loans recalculate financial aid eligibility
Federal loans and even many private loans recalculate financial aid eligibility each year, which means you reapply for the FAFSA before every academic year. There is no guarantee that you will be granted the loan the following year, although if your financial situation and other factors have not significantly changed, you’re likely to be in the clear.
It’s a tough situation to be in when your future is at stake; however, there are alternatives. Private loans tend to grant a long-term contract that you can expect to complete your degree on. Stay on top of your game and re-fill the application in time to avoid any issues or unfavorable circumstances such as being forced to take a semester or year off, or transferring or dropping out.
Your parents might be affected by these loans too.
Loans might seem like the perfect solution to students looking to be more independent and take on their financial responsibility, but truth be told, parents still aren’t off the hook. From private to federal, there are various parent loans that are available, as well as the requirement and need for a co-signer who takes responsibility in case you can’t make payments; parents are often caught in the thick of it.
This makes it doubly important to know what you’re getting into, researching all your options, applying for all types of assistance, and making sure you can handle the amount you’re borrowing, or have your parents on board completely.
If you’re a parent co-signing the loan or taking a parent loan in order to help your kids, be sure to go consider the various factors and facets of doing so, including higher interest rates. You might not be able to retire as early as you thought, either!
Consider how much you can afford to take on and whether you’ll be able to pay it off within five years or before retirement—whichever comes first.
Private loans aren’t as scary or intimidating as you think
Private loans have gotten a bad rap over the past few years because they are seen as some kind of a trap meant to hold you down forever. In truth, however, private loans empower and enable students to pursue their dream college and degree with a lot of ease.
Education Loan Finance (ELFI) is one such company that offers students private loans for college on very flexible terms. Their rates are some of the best on the market, and their terms and repayment periods are also tailored to your needs.
Federal loans have a lower cap and limitation, which can still leave you struggling to pay most of your tuition and living costs, or struggling to get through. Private loans may help you and your parents manage the cost of college with greater ease. You can learn more about ELFI’s private loans and parent loans here, or contact them for a consultation.
Financial aid doesn’t always have to be as intimidating as you think. With the rising costs of college and financial and economic instability, it’s unsurprising that many of us have depended on them to get through. All that’s important is for you to explore multiple avenues, options, and alternatives, and finding the right fit for you. Financial planning is the key to long-term financial stability.