Different forms of Financial Aid for Students

The rising cost of higher education has led the majority of families to rely on financial aid to cover the expenses of a higher education. There are several forms of financial aid and each behaves differently. It is important to know their differences and availability. Student loan aid is often used to cover a portion of education expenses. In 2004, loans comprised 45% of the financial aid awarded to families. In total, $55 million of the $122 million in aid awarded each year is in the form of loans. Education loans come in three forms: federal, private and institutional.

Work-study programs, offered by the federal and state governments as well as individual schools, provide part-time jobs both on and off campus to enable students to earn funds to pay their education expenses. Most work-study students also gain valuable work experience and greater exposure on campus.

Federal Perkins Loans are available to families with extreme financial need. These loans carry a fixed 5% interest rate, are funded by the federal government and are administered by the school. Federal Stafford Loans are low-interest loans for students enrolled in college at least half-time. Interest rates are fixed at 6.8% beginning July 1, 2006. The funds borrowed can generally be repaid over a ten year period.

Subsidized Stafford Loans are available to students with demonstrated financial need. The interest accrued on these loans is paid by the federal government while the student is in school. Payments begin 6 months after you graduate or drop below half-time enrollment.

Unsubsidized Stafford Loans are available to most students regardless of family income. Payments are not required while in school, but interest does accrue and is factored into your monthly payments, which begin 6 months after you graduate or drop below half-time enrollment.

Federal Parent PLUS loans allow parents to borrow up to the full cost of education less other aid received, for students enrolled at least half-time. The amount borrowed can generally be paid back over a ten year period. The interest is capped ate 8.5% beginning July 1, 2006. Federal Graduate PLUS loans allow graduates students enrolled at least half time to borrow up to the full cost of education less other aid received. The amount borrowed can generally be paid back over a ten year period. The interest is capped ate 8.5% beginning July 1, 2006.

Institutional loans are made available by individual colleges. Each college determines its own loan characteristics and eligibility requirements. Check with the financial aid office at the college you will attend for more information.