As tuition prices escalate, the cost of a college education may seem increasingly out of reach. But planning ahead and a little boost from financial aid can ease stress. In 2016, there were 44.2 million U.S. borrowers with student loan debt.
In order to receive financial aid for college, students will need to apply each year online at www.fafsa.ed.gov, which provides loans for almost all two- and four-year colleges, universities and career schools in the country.
Remember that not everyone who applies receives aid. Grants and loan packages are awarded according to your income and the tuition of the school you're applying to. You can estimate how much aid you might be eligible for by using the federal government's Student Aid Eligibility calculator.
When it comes to financial aid, you have two main options:
Be sure you understand your loan repayment responsibilities before accepting financial aid. If it's a grant, it doesn't have to be repaid. Loans do have to be repaid with interest upon graduation. If you're going to go that route, shop around for a good interest rate – you'd be surprised how much difference a couple of percentage points make over time. To find out just how much, explore your options using the Repaying Student Loans calculator.
Federal Financial Aid
The William D. Ford Federal Direct Loan Program is the sole government-backed loan program in the United States. Also known as Stafford Loans, these provide funding directly to students and their parents or guardians in two general varieties:
Federal Perkins Loans
The Federal Perkins loan is a campus-based loan program, awarded by the college or university's financial aid office to undergraduate and graduate students with exceptional financial need. The interest rate on the Federal Perkins loan is fixed at 5 percent.
As its name suggests, the federal Parent Loan for Undergraduate Students (PLUS) loans are loans that parents can take out on behalf of a dependent undergraduate child who is enrolled at least half-time at an eligible school. The child must meet general eligibility requirements for federal student aid. These loans can also be taken by graduate or professional students to supplement other financial aid packages. The loan amount is the total cost of attendance minus the borrower’s total financial aid package. For example, if tuition costs $30,000 per year and the student is receiving $25,000 from other sources, the maximum PLUS loan would be $5,000.
Most student loans have several types of limits on the amount you can borrow: