How to Choose Financial Aid

March 29th, 2021 by
Financial Aid

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Students who are looking to embark on obtaining financial assistance to fund their college education may find the task a bit daunting. 

As the cost of attending university rises every year, it is important that you understand the financial assistance that is out there. 

There are three types of financial aid that can be applied for, according to TransUnion. You are not just limited to one type. In fact, you can take advantage of one, two, or all three.

Related: Here are some Myths about 529 College Savings Plans

The three types of financial aid are scholarships, grants, and loans.

Scholarships

Scholarships are funded by many sources such as businesses, governments, and private and nonprofit organizations, TransUnion explains.

The recipient of the scholarship usually has demonstrated academic achievements, such as receiving excellent grades or excelling in other areas, like sports or community service.

Most scholarships will cover such things as tuition, education expenses, and some will assist with living expenses, too.

Scholarships do not need to be paid back; however, they do often contain a stipulation that the recipient continues the work or discipline that they are being recognized for throughout their college journey.

Related: Save for College with a 529 College Savings Plan

In other words, continue to achieve high grades or playing a specific sport for an academic and athletic scholarship.

Some scholarships may also require that the student do community service upon graduation.

Scholarships are very competitive with hundreds of students applying for just one at any given time.

Grants

Grants differ from scholarships in that grants are determined by need rather than achievement or merit.

Like a scholarship, grants do not need to be paid back.

Grants are usually limited in how much they will provide the recipient and often are used in conjunction with student loans.

Government Student Loans & Commerical Loans

In addition to scholarships and grants, there are commercial and government student loans available to students.

The biggest difference between a government and a commercial loan from a financial institution is that there are no credit checks when applying for a government student loan. 

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Students most likely have no-to-very-low credit scores to qualify for a commercial loan, making the interest rate very high, says TransUnion. Students who qualify for government loans may also qualify for subsidized loans, where no loans or payments are due and no interest is charged while the student is in school.

Subsidized loans can also contain Fixed, or low-interest rates, income-based repayment plans, deferment of payments when needed, or even cancellation of payments based on some types of public service employment.

With a commercial loan, the student will need to have a credit check done and may need a cosigner as well.  On the plus side, commercial loans usually can be funded in a matter of days and those funds are paid to the student, whereas in a government loan, the funds are sent to the school. 

The Federal Student Aid website is where you can go to find information for federal grants and loans.

Knowing what financial assistance is available will assist you in finding the best program for your needs.

 


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