What Is Meant By Financial Aid When Talking About College Loans?

As is the case with just about everything else the cost of college education has increased significantly. Tuition fee increases of more than 6% a year are commonplace today. As an example, in 1973 the cost of registration at UCLA (University of California, Los Angeles) was approximately $200 a quarter while today it is well over $2,000 a quarter.

That tenfold increase is not too unusual and many things now cost ten times more than they cost 25 years ago. Wages, on the other hand have risen about threefold in the same time period from about $15,000 – $30,000 a year to about $39,000 – $42,000 a year. The numbers vary by age, gender and more but as a rough guide a three times increase is about right.

Fortunately there is some good news. There are many more types of financial help available today to both students and parents than there has ever been. As its name suggests, financial assistance is money which parents and students receive from grants, loans and scholarships granted by both Federal and private lenders to aid students to pay for their college education.

A few years ago, students depended almost entirely on Stafford loans and Pell grants to finance the cost of their education and college living expenses. These days Pell grants are still issued but they’re needs based and meet a small proportion of the education cost today. Stafford loans are also needs based but can meet 25% to 40% of the average cost of school today. Another form of financial aid is Perkins loans which are similar to Stafford loans but which are reserved for particularly low income families.

Fortunately, PLUS loans are also available today and these loans were not around 25 years ago. PLUS loans are provided for parents rather than students to help parents in paying for their child’s college education. The interest rates for PLUS loans are reasonable and there are certain restrictions and fees to pay but they often form an important part of the student’s overall package of college funding.

A quick word to the wise about fees. A lot of loans are for a specific amount of money like $6,000 a year disbursed in several payments (often once per semester). But it is common for up to 4% in fees to be taken from that amount before the funds are disbursed. That 4% fee on your $6,000 represents $240 which you not see but which you have to repay. When you are searching for a loan make sure that you do your homework and see if you can find a low or no-fee loan.

Though Federal loan programs like the subsidized Stafford loan program carry low fees and interest is paid by the government, they are not the only source of financial assistance today and are not necessarily the best option.

Funding the cost of a college education today is a complex operation and most students will have to put together a package of funding which includes scholarships, grants, government loans and private borrowing.

Fortunately, there are now far more sources of finance available than ever before and competition in the open market between private lenders in particular means that it is possible to find funds at a price which will not necessarily run you into unmanageable debt.

You are also lucky to be living at a time when getting hold of the information which you need to make reasoned decisions about the choices which are open to you is also fairly simple.