Loans For School: Finding The Right Student Loans

Loans For School: Finding The Right Student Loans

If you, or perhaps a close family member, are extremely well-off, you just might wish to stop reading right now. Most students, though, come to realize that they must find good loans for school to pay the expenses that were not covered by savings, grants or scholarships.
Before we consider some of the more desirable loans for school, let's analyze a few of your worst options for funding your college education.

Some Poor Choices

The first character in our rogue's gallery is credit cards. Admittedly, they are convenient to use and can bail you out of some tight situations. The fact is, you need them just to function in today's economy. Try renting a car or making an online purchase without one! But seriously, for financing your tuition? Only consider them if you have a rock-solid plan to pay them back. Otherwise, credit cards can annihilate you with high interest rates, late charges and over limit charges.

Another terrible source of funds is check cashing stores. The interest rates these places charge are enough to choke a horse! Seriously, if you use these often enough you may never recover. Be honest with yourself, if you don't have the money right now, what makes you think you'll have it in 2 weeks? Avoid these places!

What about gambling? There are so many exciting games: poker, roulette, one-armed bandits, dice, horse/dog races, and of course the lottery. For the casino owners, gambling is a lucrative business. For you, though, gambling is just a really bad habit to get into. It won't pay your tuition. Don't waste your time (and money).

Another character in our rogue's gallery is the title loan, which requires you to sign over your car title as collateral. Typically, you will only get a fraction of the car's value, and the interest rate is quite high. Many borrowers then find they are unable to repay the loan, and lose their car. If you are willing to give up your car for much less than what it's worth, why don't you just sell the car and bank all the cash? At least you'll earn some interest instead of paying it.

Some Better Choices

Assuming you have made every reasonable effort to get scholarships and grants, it's now time to shop for the student loans you'll need to cover all the rest of your expenses. So let's have a look at some of the more reasonable types of loans for school. We can divide these into two categories: private student loans and government guaranteed loans. Private loans are funded by banks and other institutions. These loans generally carry a higher rate of interest than the government loans. Every lender has its own rules. You might need a cosigner, and you probably will need a fairly high credit score to qualify.

Government guaranteed loans for school generally offer lower rates, longer payback schedules, and the option to consolidate loans after completion of college. A consolidation loan could lower the overall interest rate as well.

There are three categories of government loans: Stafford loans, Perkins loans, and Grad-PLUS loans. Grad-PLUS is short for Graduate student and Parent Loans for Undergraduate Students.

These three have some various rules, but also share several similarities. At ExploreStudentLoans.com we discuss each of these loans in greater detail. One thing they do have in common, though: you must show a financial need to be eligible for the loan program. For all of these, you will need to submit a FAFSA (Free Application for Federal Student Aid) form to verify your eligibility.

Should You Get a Scholarship or a Student Loan?

Well, DUH! Who doesn't like free money? A scholarship or grant is far better than a loan. If you can qualify for one or more of the many scholarships and grants currently available, by all means, go for it. Loans for school are able to fill in the gaps when you can't get enough of the free money. Try to keep those loans to a minimum, though, and pay them off as soon as possible to keep your interest expense to a minimum.

And finally, be cautious about using loans for school if your chosen career will begin at a relatively low pay grade. If that is the case, you may want to consider working part time to "pay as you go" for your expenses. Don't be like some students who graduate with such a heavy debt load that it severely limits their future. If you practice frugality now, you'll thank yourself for it later.