Just because you were able to qualify for a Pell Grant doesn’t necessarily mean that you’ll be able to pay for your entire tuition, and other education-related expenses. This is because the Pell Grant can provide you with a limited amount of financial aid, and is currently capped-off at 5,550 dollars for the 2010-11 school year. This is still a considerable amount of money, however if you need additional capital for your higher education you are probably going to want to take into consideration your options when it comes to student loans, as these financial aid instruments can provide you with a very large amount of money to put towards your college expenses.
What Are Student Loans?
Student loans are different form educational grants in that they are in-fact loans that have to be paid back, and while they do come with fairly low interest rates and fees, unless you exemplify some very rare and unique circumstances, you are going to have to pay them back at some point during your lifetime.
Regardless, they can provide you with a much higher amount of funding when compared to the Pell Grant, and can often provide you with enough money to pay for your entire cost of attendance. Before you get too excited about student loans you must first understand that there are two main categories that the majority of education loans fall into.
Federal Student Loans
The two main types of student loans are federal student loans, and private student loans. Each of these categories has their advantages and disadvantages, and we’ll start by quickly going over what federal student loans have to offer you. Federal student loans are provided by the federal government much in the same way as the Pell Grant is, and most of the federal loans that are available to undergraduate students can be applied for via the FAFSA.
Federal student loans come with fairly low interest rates that are fixed, and very flexible repayment terms. Their primary disadvantage is that the amount of money they can provide you with is typically capped off for a particular award year. You will have a better chance at getting a higher amount of federal college loan aid if you can exhibit a significant financial need.
Private Student Loans
Private student loans are different from federal student loans in that they are not provided by the federal government, and are instead provided by various independent private lenders. Private student loans come with higher interest rates, and less flexible repayment terms when compared to federal student loans, although they can be made in higher denominations if you require that level of funding.
Private loans are based upon credit, and you will therefore have to either provide the lender with a credit-worthy cosigner, or be able to show them an extensive credit history to get an approval. Overall it is usually a better idea to first see where you stand when it comes to the various forms of federal student aid, including federal student loans, before you go ahead and apply for any private student loan funding.
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