What Is Student Financial Aid?

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Student financial aid comes in many different forms and models today. The cost of education has risen dramatically over the past 4 decades, just as everything else has. Today, tuition increases of more than 6% per year are fairly common. As an example, in 1973 registration at UCLA (University of California, Los Angeles) was $208 per quarter. Now it is over $2,300 per quarter.

That increase of ten times is not too unusual. A lot of goods and services that we buy or use cost ten times what they did a few decades ago. Unfortunately, income has risen only about three times in the same period. So, if your income was between $15,000-$30,000 per year then, it has probably increased to around $39,000-$42,000 today. The ratio of 3:1 is about right however the numbers vary according to gender and age and are a rough guide.

Those statistics look grim, but now for some good news. Students and parents have more types of financial aid programs available today than ever before. Student financial aid is money that students and their parents can access from scholarships, Federal and private lenders and a few other sources, to help pay for education.

Years ago, students could depend almost entirely on Pell Grants and Stafford Loans to finance their education costs and most if not all their living expenses. Pell Grants are still available, but they're based on need and represent a small percentage of the cost of education today. Stafford Loans are also based on need and can range from 25%-40% of the average cost of financing the school term. Perkins Loans are much the same, but reserved for the lowest income families.

Fortunately today, another student financial aid source are PLUS Loans. They are loans granted to parents, not students, to help pay for the student's education. The interest rates are average, and they carry certain restrictions and fees. PLUS loans are often only a part of the student financial aid requirements.

A caution about fees in general. Many loans are for a specified amount, say $5,000 per year disbursed in two payments (one per semester). It is not uncommon for up to 4% in fees to be deducted from that amount before any funds are distributed. That 4% on $5,000 equals $200 you never see, but still have to repay, so be sure to search for low or no-fee loans.

Federal loan programs, like the subsidized Stafford, carry no credit check and low fees. Interest is paid by the government. They are not the only source of student financial aid today.

Today, the average student loans package will be a mixture of grants, scholarships (if possible), Federal and (probably) private loans. Interest rates range from 5% (Perkins) to the more common 6.8% or higher. Due to the recent substantial increase in defaults on sub-prime loans, lenders will be more cautious than before when reviewing credit history and income.

To get started, look at the most common loan programs and review what interest rates and fees they charge along with any eligibility requirements. One site that summarizes much of that information on student financial aid programs is: www.finaid.org .

1 green arrow right  The Federal Direct Student Loan Program

1 green arrow right  The Stafford Student Loan Program

1 green arrow right  PLUS Loans

1 green arrow right  Private Student Loan

1 green arrow right  Bad Credit Student Loan

1 green arrow right  Graduate Student Loan

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