February is National Financial Aid Awareness Month, and navigating financial aid can often feel like a minefield. But before you grab your helmet and armor, it helps to do some reconnaissance work and understand the different types of aid available to students.
Grants cover all funds that don’t need to be repaid, providing a student finishes their schooling. Federal grants include Pell Grants, Federal Supplemental Educational Opportunity Grants (FSEOG), Teacher Education Assistance for College and Higher Education (TEACH) Grants, and Iraq and Afghanistan Service Grants. Grants are typically awarded based on need.
Scholarships are awarded to students based on merit, talent or other factors, like interest in a particular field of study. Nonprofit and for-profit organizations, as well as educational institutions, all offer scholarships.
Loans must be paid back—with interest—and are arguably the most complex of the financial aid equation. When a student completes the as part of their application for financial aid, they may be offered federal loans as part of their aid package. Federal loans include:
With federal subsidized loans, the government pays the interest on the loan while the student is still in school; once a student has graduated, they are responsible for paying the interest. The amount of money a student receives in a federal loan varies, but it’s smart to start with federal loans before looking into private student loans.
Private loans are dispensed by financial institutions like banks, credit unions and other lenders. The lender sets the terms for repayment, interest rate and more. Depending on the lender, interest rates can be variable or fixed, and could be higher or lower than federal rates. Private loans aren’t typically subsidized and cannot be consolidated, but they can be refinanced as needed.
When taking out a private loan, it’s important to ask the following questions:
Prior to accepting a loan, whether federal or private, it’s important to understand the loan's terms and conditions to ensure that you have all the facts at your disposal. Knowledge is power—the more you know, the better off you’ll be when it comes to do battle with financial aid.
Still have questions? We invite you to with one of our bankers to discuss your borrowing needs and learn more about personal loans.
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