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Students who first consider college and how they are going to pay for it may be overwhelmed with the financial aid options that are presented. In most cases, the financial aid options can be segregated into two major categories -- grants and loans. A grant, for all intents and purposes, is a loan that does not have to be paid back. This category may also include forgivable loans, where the debt will be paid by the government or another institution, if certain conditions are met.
Grants come in two different forms, scholarships and general student financial aid. In some cases, grants may be available for students for any reason. One of these grants, in the United States, is called the Pell Grant, which is available for nearly any student pursuing a first undergraduate degree. Scholarships are often based on performance, either in academics or perhaps in a sport or music. These are another form of financial aid with no payback required.
Student loans do need to be paid back, but may be structured in a way that payment does not start until after graduationk or at least not until the student drops below a certain number of credit hours each semester. Once that starts, there is a six to nine month grace period. At that point, the payments begin. Depending on the type of loan, interest may be charged right from the beginning, or may only start at the end of the grace period.
Most financial aid, at least in the United States, is a product of the federal government, which wants to encourage an educated workforce. However, this is not the only type of financial aid. There is also state financial aid and even aid from private organizations, through the form of scholarships. Check with your local financial aid adviser for more details on any programs that may be available to you.
One major form of aid a state offers, though it is rare for it to be termed aid, is in-state tuition. This is a discounted rate off regular tuition rates for those students who choose to attend a public college or university within their home state. There may be other requirements to be eligible for this, such as living in the state a certain period of time.
Another form of financial aid offered is something referred to as work study. In this situation, the student volunteers some of his or her labor in service to the university or college, in exchange for a credit on a portion of the cost of attending the college. This can significantly reduce the amount owed coming out of college after a four-year period.
SurfNturf- Financial aid loans unlike other loans can not be eliminated in a bankruptcy. For this reason it is a good idea to only request loans that you can repay.
Also once you consolidate your financial aid loans, you can not do it again to get a better interest rate. This is why it is important to watch the interest rates and when the rates come low enough, consolidating the various loans into one larger loan with a lower interest rate makes sense.
I think obtaining a work study agreement is the best form of financial aid and it does not require a loan. For me this is the ideal arrangement.
I just want to add that Perkins loans are sometimes available to students. But instead of paying a bank, you pay the school directly. These loans usually offer a competitive interest rate of about 5%.
Many loans of this type allow the student up to six months after graduation before they need to begin paying back the loan. This gives the student an opportunity to find a job before the financial obligations of the loan set in.
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