Differences between Types of Financial Aid Programs
When developing a strategy to pay for your college education, it is imperative to understand the different types of financial aid programs and the requirements of each specific program.
The most commonly used sources of education financing include student loans (both federal and private), grants, scholarships and monthly payment plans. Student loans are by far the most commonly used method for educational financing, primarily because the loans are available to anyone interested in continuing their education.
Student loans come in many different types. The best option for a student loan is either the Federal Stafford or Federal PLUS (Parent) Loan. These programs offer a generous repayment schedule, competitive interest rates and many borrower benefits. Private alternative loans are also common; however they should only be used to supplement other forms of assistance – not to replace them.
Grants and scholarships are generally either need-based or achievement-based programs that provide the student with financial aid that never needs to be repaid. There are many different programs offered by the federal government, individual states and even individual schools. There are different types of grants and different grant amounts with each individual program.
Payment plans are alternative financing options for students and parents who need assistance paying for college, but who do not want to generate educational debt. The premise of these programs is that the payment plan provider will allow the student’s account to be paid each month – but the school considers the account paid in full when the contract is finalized. There are several programs that offer their services with nothing more than a small enrollment free. Interest-free programs are definitely the best option.
Applying for most of these programs is very simple, and can be done by completing the Free Application for Federal Student Aid (FAFSA). Once this form is completed, the information is given to the student’s school and the individual financial aid office will review the student’s application data in order to develop a financial aid package.
A solid educational financing strategy will give the student the ability to pay for college, while generating as little educational debt as possible. There may be a variety of options available for the student to choose from, and therefore as mentioned above, it is imperative to know the benefits of each individual program. What is right for one student is not necessarily the best solution for every student.