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Private Loans
Private loans are loans offered by agencies like banks and credit unions. These loans
typically have higher interest rates than federal student loans. In order to qualify, there
are certain income and credit score requirements. If you have not yet established credit,
or have poor credit, you may want to try and obtain a co-borrower or co-signer to help
you qualify or reduce your interest rate. Shopping around locally or online for a loan with
the best interest rates is the sign of a smart borrower!
Scholarships
Scholarships are funds that do not need to be repaid and are awarded on the basis of
academic achievement or other merits, such as sports acumen, or community service.
Colleges and other organizations award scholarships. Almost all students can find a
scholarship with a little hard work. Sites like fastweb.com and scholarships.com have lists
of scholarships for students like you. Perhaps you have a parent that works for a major
corporation like General Electric or Microsoft that have scholarships for students of
employees, or maybe they belong to a fraternal organization like the Knights of
Columbus or Rotary Club. These organizations have money available and you can find it
online.
Once you have exhausted your grant options, applied for scholarships, and submitted
your FAFSA to determine the federal aid that you can receive, you may still need money
to cover your education-funding gap. “Gap funding” is the amount of money needed
to cover your educational expenses above what you have received. Your goal should
be to minimize your gap, since gap financing typically comes with higher interest rates.
Consider talking to your parents about obtaining a Parent+ loan, which is a government-
financed program that allows parents to assist their children with their academic
expenses. Some students are even setting up an account at a crowd-sourcing site, like
GoFundMe.com/education, where friends, family, or strangers can contribute to their
education.
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My Student Loan Payment
The Internet is full of sites that enable you to estimate your monthly student loan
payment. Select a site by searching “Student Loan Repayment Calculator” or use
the calculator at aie.org/pay-for-college.
Enter the estimated amount of student loans you will have.
Don’t include grants or scholarships, since those are funds that don’t need to be
repaid.
Next, assume a 6% interest rate and a loan term of 120 months.
Once you know what the estimated monthly payment will be, answer the
questions that follow.
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Section 8 – Responsible Borrowing and Budgeting