Understanding your student loan financing options
Starting the collegiate adventure may be just around the corner - have you applied for financing? If you’re in need of student loans to cover tuition expenses or room and board fees, it’s time to get started! Let’s explore the various financial aid options available to you from federal and private lenders.
Federal Financial Aid
The Free Application for Federal Student Aid (FAFSA) is typically a student’s first step toward understanding which type of federal aid is available in their situation. You’ll start by creating an FSA ID, which is the account username and password you will use to log in to the platform to apply for aid, re-apply annually and complete other tasks related to financial aid and repayment. Your parents may also create an ID, which they can use to supply their personal and financial information on your application if you qualify as a dependent student.
How it works
The FAFSA application opens each year on October 1 and must be submitted by June 30, but many institutions and states have additional deadlines. For example, Kansas requests applications by April 1. For priority consideration in Missouri, applications must be turned in by February 1, but are still accepted until April 1. After submitting your FAFSA application, you’ll receive a Student Aid Report (SAR) detailing the type of loan and loan amount for which you qualify. A copy of the SAR will be sent to each potential university you listed on your FAFSA so their respective financial aid offices can prepare a financial aid offer.
Loan types
Direct Subsidized and Direct Unsubsidized are two loan types provided by the U.S. Department of Education for undergraduate students. Direct Subsidized loans are for students with greater financial need, which the Dept. defines as “the difference between the cost of attendance (COA) at a school and your Expected Family Contribution (EFC).” The Dept. will pay the interest on a subsidized loan while you’re enrolled at least half-time, for 6 months after graduation, and if you enter into a deferment period. On the other hand, you are responsible for paying interest on Direct Unsubsidized loans during all periods. The total amount you are eligible to borrow in federal aid depends on many factors, including year in school, dependency status, marital status, degree and more.
GROW your money with a high-yield savings account
Financial education at your fingertips
Non-federal Financial Aid
Private Loans
If federal aid doesn’t cover the full amount you need, you might seek out private loans from non-federal lenders, like a bank, credit union or state association. Private lenders may require credit history or a co-signer with credit history to apply. In addition, these loans may not have the same terms and conditions as federal loans, so be sure to read all the fine print before accepting an offer.
Grants
Grants are awards provided by federal and private sources. Typically, this type of financial aid is needs-based and doesn’t need to be repaid.
Scholarships
Scholarship awards can be needs- or merit-based and do not need to be repaid. Universities, employers, nonprofits, and other social organizations may offer these. Typically, there are certain requirements that must be met to retain a scholarship in the following school year.
Whatever your need, the FAFSA is an important place to start. If you’re able to pay some costs out of pocket, you can also contact your university to discuss possible payment plans.
Need help deciding which type of funding is right for you or your child? Take our free online course or meet with our banking advisors to discuss your journey to higher education!
