Financial Aid

There are many options available to help pay for one’s college education. Financial aid is money loaned to students by the government to assist in paying for college. How to repay the loans depend upon the type of loan one receives. Loans accrue interest while the student is in college, but not all students have to repay that interest. Some loans, like grants, don’t even have to be repaid. The two main types of financial aid loans are Stafford Subsidized and Unsubsidized Loans.

• Subsidized Stafford Loans are based on the financial need of a student. If the government feels that a student is in particular financial aid need, that student may qualify for special treatment. Basically, all loans accrue interest during schooling and after graduation. Under a subsidized loan, the student is not responsible to pay the interest back to the government until the loan goes into repayment after graduation. Instead, the government fronts the cost of the interest while the student is in college, during the typical six month grace period after graduation, and during times of deferment.

• Deferment means that during repayment, the student is experiencing financial difficulty in repaying a loan. He or she can send in an application to the loan agency requesting a government deferment. If granted, the student will not have to pay his or her student financial aid for a few months, and in the mean time the government will cover the costs of any accrued interest. Upon leaving deferment, the student then resumes payment of the loan including the interest. Students are only granted a limited amount of government deferments, so use them wisely. If a student is experiencing financial difficultly and cannot repay the full monthly amount of a loan, he or she can apply for a forbearance. Like a deferment, a forbearance is a period of time during which the student is not responsible to repay a financial aid loan, however, interest will continue to accrue on the account during the lifespan of the forbearance, even if that loan is a subsidized. When a student leaves a forbearance, the total amount of money owed will have increased, and he or she is responsible for repaying the new total.

• An Unsubsidized Stafford Loan is basically the opposite of a subsidized one. The student is responsible for all the interest accrued on the loan regardless of the collegiate status of that student. Many students choose to pay off the monthly interest of the unsubsidized loan while they are in college, leaving the total balance of the loan untouched until graduation. Other students defer the interest accrued on the loans until after graduation, choosing instead to repay the interest with the actual monthly payments after the post-graduation grace period.

Financial aid for college is stressful, but not all that hard to figure out. The good thing is that most repayment agencies are understanding when it comes to college students. Most graduates who experience difficulty repaying their loans have no problems securing a deferment or forbearance, so don’t stress too much where the money is coming from after graduation. Over time, the loans will be paid off, but the education one receives will last a lifetime.