What Is Meant By Financial Aid When It Comes to College Loans and Grants?
As with everything else the cost of education has risen dramatically. Tuition fee increases of more than 6% per year are common these days. For example, in 1973 the cost of registration at UCLA (University of California) was round about $200 per quarter and now it is well over $2,000 per quarter.
This ten times increase is not at all unusual and many things now cost ten times more than they cost 25 years ago. By contrast, wages have increased approximately threefold in the same time period from about $15,000 – $30,000 per year to around $39,000 – $42,000 per year. These figures vary by age, gender and a great deal more although as a rough guide a three times increase is about right.
Fortunately it is not all doom and gloom. There are many more forms of financial assistance available today to both parents and students than ever before. Financial assistance, as its name suggests, is money that students and their parents receive from grants, scholarships and loans granted by Federal and private lenders to help students in paying for their education.
Until recently, students could depend almost entirely on Pell grants and Stafford loans to finance their education costs and college living expenses. Nowadays Pell grants are still issued although they are needs based and meet a very small percentage of the education cost today. A Stafford college loan is also needs based but can range from 25% to 40% of the average cost of college today. Another form of financial aid is Perkins loans that are similar to Stafford loans but that are reserved for particularly low income families.
Happily, PLUS loans (Parent Loans for Undergraduate Students) are also available today and these were not an option 25 years ago. Despite the fact that they are known as student PLUS loans are provided for parents and not students to assist them in paying for their child’s education. Interest rates on PLUS loans are average and there are certain restrictions and fees levied but they often form part of the student’s total package of funding.
One very quick note about fees. Most loans are for a specific sum of money like $6,000 per year disbursed in several payments (normally one payment each semester). However it is not uncommon for up to 4% in fees to be deducted from the loan amount before any funds are distributed. This 4% fee on your $6,000 equals $240 that you will never see but that you must repay. Whenever you are searching for a loan ensure that you do your homework and see if you can find a low-fee or no-fee loan.
Although Federal loan programs such as the subsidized Stafford loan program levy low fees and the government pays the interest, they are not the only source of financial assistance nowadays and are not necessarily the best option.
Funding the funds to cover the cost of a college education nowadays is a complicated operation and most students will have to put together a funding package that includes scholarships, grants, Federal loans and private financing.
Happily, there are now far more funding options available than we have seen for a long time and market competition between private financial institutions in particular means that it is possible to obtain funds at a price that will not necessarily run you into unmanageable debt.
You are also lucky to be living at a time when finding the information that you need about college grants and loans to make good decisions about the options available to you is also relatively simple.
