Federal Student Loan Aid Falls Short For Many American Families

Federal Student Loan Aid Falls Short For Many American Families

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We have some good news and some bad news for you. First the good news: President Bush signed legislation that has recently gone into effect to help families cope with rising college costs. In a nutshell, aid amounts have been increased while Stafford federal student loan rates have dropped. Now for the bad news: The new law only goes so far as many American families will still have to borrow money to pay for their student’s higher education.

Federal Financial Aid or Private Student Loans?

Although the news is both good and bad, families still have some strong options at their disposal. Financial aid is widely available in the form of both federal student loans and private student loans. Is there a difference between these two college loan choices? Yes, so let’s take a look at how these options work and what they can offer for you:

Stafford Loans – Named for Senator Robert Stafford of Vermont in honor for his work in higher education, Stafford loans is the federal guaranteed student loan program managed by the U.S. government. College loans are backed by the federal government and, therefore, carry a lower rate than private loans. Strict eligibility requirements and borrowing limits are two important attributes of these types of loans.

Private Student Loans – As the name implies, these loans are offered by private financial institutions, such as banks. Private student loans can be used in place of Stafford loans or as a supplemental loan. Undergraduate and graduate students can borrow as much as $40,000 annually or up to the full cost of annual tuition and expenses less financial aid received, whichever is less. Because this type of college loans is unsecured, rates are usually set much higher than federal student loans.

A Two-Tier Student Lending Plan

Both private student loans and Stafford loans allow students to wait until after graduation before repayment on the loan(s) is required. Many students take a look at federal financial aid first and use private student loans to fill in the gap between what they can borrow and their actual expenses. This two-tier financing approach allows borrowers to secure low rate federal student loan aid while limiting what they will need to borrow from banks or other private student loan providers.

Shop and Compare Private Student Loans

Worth noting is that when it comes to private student loans, each lender sets their own terms, rates, and qualifications. Therefore it pays to shop and compare before choosing private financing.

Higher Education Is Within Your Reach

Although the borrowing aspect of financing your education can seem daunting, it does provide options that allow you to get a college education in the first place. Carefully examine your choices to come up with the best financial aid package that is right for you. Please visit the SayStudent website for aid information and free, downloadable tools.

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Categories: Student Aid