In today’s competitive job market, an advanced college degree is all but required to earn the highest salary possible and to establish a foundation for long-term career success. Many people are afraid to enroll in a college or university, however, because of the high costs associated with higher education. Fortunately, there is financial aid available to help students pay for their bachelor’s and master’s degrees. Recognizing the benefits that come with an educated populace, the United States Department of Education offers grants and loans to qualifying students every year so that they can pay the costs to attend college.
Even though the federal government of the United States has been offering financial aid packages of various kinds for several decades, many potential students are afraid to sign up for federal student aid because they have heard horror stories about draconian loan repayment terms. A recent account from the New York Times about a law school graduate who had trouble getting certified as a lawyer with the New York State Bar Examination because of his $400,000 student loan debt is just one story that might scare people away from federal student aid. Is a story like this one the norm, and are student loans really that terrifying of a prospect? Read on and find out.
A federal student aid package is a combination of education grants and loans that is awarded to students based on financial need. This package can be used to pay for tuition, room and board, books, and other education-related expenses associated with going to college.
The short answer to this question is no. Grants never need to be repaid, so the portion of the financial aid package that is made up of Pell Grants and other grant awards is a free gift to the student that does not need to be returned unless the student decides not to enroll in classes after the grant has been distributed. In the vast majority of cases, however, student loans must be repaid. Nevertheless, some students can have a portion or all of their student loans forgiven if they participate in certain government programs. For example, the Stafford Loan Forgiveness Program for Teachers allows teachers with student loans to have some or all of their debt forgiven if they teach for a designated period of time at schools that serve low-income students. Loan forgiveness is also available for many people who serve in the military or as volunteers for the federal government.
The law school graduate mentioned in the introduction to this article graduated with $400,000 in student loan debt, and that is a frightening amount of indebtedness to be sure. Students and parents should know, however, that such a large amount of debt is the exception and not the rule. As of 2010, the average college graduate owed $23,200 in student loans, a debt load that is manageable as long as the graduate finds employment. Still, it is wise not to borrow more than is absolutely necessary to fund a college education. As the amount of debt grows, it becomes more difficult to pay back student loans and to afford other expenses at the same time. Students who rely on a combination of scholarships, grants, wages from part-time employment, and loans to pay for their college education will have an easier time keeping their debt load low and paying it back than those who fund their schooling through student loans alone.
Every student that wants to apply for federal financial aid needs to fill out the Free Application for Federal Student Aid (FAFSA) located on the U.S. Department of Education website. Students fill out this form electronically, and it is then sent to the schools that the students are considering for their education. The financial aid offices at these prospective schools help determine the type of financial aid package that the applicants qualify for, and these offices also disburse funds to qualifying students. Low-income students will qualify for the most grants and for the loans with the most generous repayment provisions.
Subsidized Stafford and Perkins Loans do not accrue interest while the student is enrolled in courses, and there is a grace period of six months for Stafford Loans and nine months for Perkins loans between the point at which the student no longer meets minimum enrollment standards and the point at which the loan must be repaid. Unsubsidized Stafford Loans also have a grace period of six months, but interest accrues while such loans are not being repaid, and this interest is added to the loan balance. It is therefore wise for students to make at least the interest payments on unsubsidized loans while they are in school to avoid higher loan balances later on.
Payment for Federal PLUS Loans for graduate students can be deferred while the student is enrolled at least half-time and for up to six months after graduation. Otherwise, the student must begin to repay the loan immediately. Interest on Federal PLUS Loan is added to the loan balance while the student is not repaying the loan, even if deferment has been approved.
In certain cases, an extra grace period or deferment may be granted for certain federal student loans. Economic hardship, military service, and other factors may qualify students for such deferment.
Federal student aid is the easiest financial assistance that college students can qualify and apply for, and it also offers the lowest interest rates and most generous repayment terms. Students are encouraged to take advantage of the various federal student aid programs so that they will be able to afford their education, an education that is the key to their success in the future.