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Aug 20, 2021

Types of Student Aid Defined

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Going to college is a huge milestone. If you have decided to pursue higher education, you have likely considered various factors when making your decision, such as geographic location, number of students in a classroom, cost and programs offered. Once you have selected your desired college, and even before making this decision, it is important to also consider how you will pay for your education.
There are a variety of ways that you can pay for higher education, such as financial aid, scholarships, student loans or savings. It is important to think about your unique financial situation when deciding where to attend college, and how you intend to pay for the costs.


Federal Financial Aid

To learn what types of federal financial aid you are eligible for, you must submit the Free Application for Federal Student Aid (FAFSA). You can submit the FAFSA starting on October 1st for the upcoming school year, and it is recommended to apply as soon as possible as financial aid is awarded on a first-come, first-serve basis. You need to submit your FAFSA each year that you will be a student.  
Schools use your FAFSA to put together your financial aid package and determine the various types of aid you are eligible for, such as grants, federal student loans and work-study opportunities. There are many different forms of financial aid:
  • Grants: Grants are a form of financial aid that you (usually) do not need to pay back. These types of grants are typically awarded based on financial need, and may have certain eligibility requirements.
  • Federal student loans: Unlike a grant, student loans are borrowed money that accrues interest and requires the loan to be paid back with interest.
  • Work-study: Students with financial need may be eligible for federal work-study, which is a way to pay for higher education through working a part-time job.
 

Scholarships

Scholarships are a great way to lower the cost of higher education. The amount of money you receive from a scholarship can vary from a few hundred dollars to the entire cost of your tuition. Unlike student loans, scholarships do not need to be paid back, so it is wise to apply for as many scholarships as you can to decrease the cost of education. There are many different scholarships out there, with different eligibility requirements. Exploring a database of scholarships is one option for figuring out which scholarships you may want to apply for.
TruStone Financial Foundations offers scholarships to members who are graduating high-school seniors annually in the Spring. Check the TruStone Foundation Scholarship program for details.


Student Loans

Many students take out student loans to pay for the cost of college. There are two types of student loans, federal and private, and each one has different features and terms. When applying for student loans, it is important to consider the differences between the loan types.
  • Federal student loans: This type of student loan is from the government, and has terms that are determined by law. These loans have a fixed-rate interest, and offer different repayment options, such as income-driven repayment. These loans offer flexibility and benefits, such as deferment and forebearance, access to loan forgiveness, and federal acts, such as the relief act passed in response to the COVID-19 pandemic. Federal student loans can be either subsidized or unsubsidized. Direct Subsidized Loans are awarded based on financial need, and the United States Department of Education pays the interest on this loan while you are still in school. After graduation and your grace period, you will pay interest on this loan. On the other hand, Direct Unsubsidized Loans do not take financial need into account, and you are responsible for paying the interest, which starts to accrue upon opening. At certain times during the life of your loan, your interest may be capitalized. Both subsidized and unsubsidized loans have a maximum amount that you are able to borrow per year, which varies based on your unique financial situation. In both cases, your student loan interest may be tax deductible. See your tax professional for questions.
  • Private student loans: This type of student loan is offered through a financial institution, and will have different terms depending on the lender. These types of loans are credit-based, and your interest rate will vary based on a variety of factors, including creditworthiness. Private student loans may have variable-rate or fixed-rate interest depending on the lender. Typically, you will need a co-signer, such as a parent or guardian, or an established credit history, to be approved for a private student loan.
 
Some students may also take out both federal and private student loans to pay for school. When you begin repaying your student loans, it is important to know the differences between federal and private student loans; as well as what the options are for consolidating and refinancing
High School College Credit Opportunities
High school students can take advantage of Postsecondary Enrollment Options (PSEO) in Minnesota and Dual Enrollment in Wisconsin. These programs allow resident high school students to earn dual credit for both high school and college. Tuition, fees and required textbooks are provided at no cost to the student. This is an excellent way to earn college credits while fulfilling basic college requirements.
 

Closing Thoughts

It is no secret that higher education is expensive, but there are various forms of student aid that can help you afford to attend college. It is important to research ways to pay for college and develop a plan that works for you now and after graduation.

 

Parts of this article were sourced from StudentAid.gov, Sallie Mae, Career One Stop, NerdWallet, MN Department of Education, and WI Department of Public Instruction.

Contents of this blog article are intended to provide you with a general understanding of the subject matter. However, it is not intended to provide legal, accounting, or other professional advice and should not be relied on as such. Information may have changed since the publication date.

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