What Is Financial Aid When Talking About College Loans? - By: Don Saunders

As with everything else the cost of education has risen greatly. Average tuition increases of more than 6% a year are commonplace now. Just as one example, in 1973 the price to register at UCLA (University of California) was just over $200 a quarter and now it is more than $2,000 a quarter.

That ten times increase is not at all unusual and lots of things cost ten times more than they cost 20 or 25 years ago. Incomes, by contrast have increased roughly threefold in this same time period from in the region of $15,000 - $30,000 a year to approximately $39,000 - $42,000 a year. These numbers vary according to age, gender and a great deal more but as a rough guide a three times increase is about right.

But it's not all gloom and doom. There are a lot more types of financial help available now to students and parents than there has ever been. Financial aid, as the name suggests, is money which parents and students get from grants, loans and scholarships issued by Federal and private lenders to assist students in paying for their education.

Formerly, students were dependent almost completely on Pell grants and Stafford loans to finance the cost of their education and living expenses. These days Pell grants are still issued but they are need based and meet a very small percentage of college costs today. Stafford loans are also need based but can meet 25% to 40% of the average cost of financing school nowadays. Another type of aid is Perkins loans which are similar to Stafford loans but which are issued only to the lowest income families.

Happily, PLUS loans are also available today and these were not around 25 years ago. PLUS loans are provided for parents and not students to assist parents to pay for their child's education. The interest rates for PLUS loans are reasonable and there are some restrictions and fees charged but they often form an important part of the student's overall package of funding.

One very quick note about fees. Most loans are for a specified amount of money like $6,000 a year to be disbursed in several payments (normally one payment per semester). But it is not uncommon for fees of up to 4% to be taken from the loan amount before the funds are disbursed. This 4% fee on a $6,000 equals $240 which you never see but which you have to repay. When you are seeking a loan ensure that you do your homework and try to find a low-fee or no-fee loan.

Although Federal loan programs like the subsidized Stafford loan program levy low fees and the government pays the interest, they are not the only form of financial aid nowadays and are not always the best option.

Meeting the cost of education nowadays is a complex operation and most students will need to assemble a funding package which includes scholarships, grants, Federal loans and private financing.

Luckily, there are now a lot more more sources of finance available than ever before and competition in the open market from private financial institutions in particular means that you can get funds at a price which is not necessarily going to run you into unmanageable debt.

You are also fortunate to be living in an age where getting hold of the information which you need to make wise decisions about the options available to you is also quite simple.

About the Author

TheStudentLoansCentre.com provides a wealth of information for students covering everything from an introduction to college loan financing to a detailed look at student loan consolidation

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