Understanding Different Ways to Handle the Cost of Education

Getting a higher education can be beneficial in a number of different ways. However, the cost of education is expensive and can be a lot for people to handle. Luckily there are a variety of different ways that a person can deal with the cost of education from grants, to scholarships, to loans. There may be more opportunities than you realize.

Using Grants to Handle the Cost of a Higher Education

Grants are a popular option for students because it is financial aid that doesn’t need to be repaid. Grant funds generally come from the government. Grant eligibility varies but generally factors that are important include:

  • Income level
  • Family status
  • Cost of attending school
  • Disability status

Some popular grants available to students are:

Teacher Education Assistance for College and Higher Education (TEACH) Grants

The TEACH grant can provide eligible students who are completing or plan to complete the coursework necessary to begin a career in teaching of up to $4,000 every year if they:

  • Participate as an undergraduate, graduate, or postbaccalaureate student
  • Attend a participating school
  • Enroll in a TEACH-Grant-eligible program
  • Receive TEACH Grant counseling
  • Sign a TEACH Grant Agreement to Serve or Repay.

Pell Grants

This is a popular federal grant option that can provide students with up to $6,495 every year. However, it is important to know that the awarded amount is subject to change annually! This grant is typically for undergraduate students who are in financial need and have not yet earned their bachelor’s, graduate, or professional degree. There may be exceptions to this. The grants will be paid to recipients either directly, through the school, or through a combination of both.

Federal Supplemental Educational Opportunity Grants (FSEOG)

The FSEOG grant is one that is given directly through your school’s financial aid office at participating schools. Not every school participates in this grant opportunity so you will need to see if your school is a part of the FSEOG program. Students can receive grants of up to $4,000 every year from the United States Department of Education’s (DOE) office of Federal Student Aid.

Iraq and Afghanistan Service Grants

Students that meet special eligibility criteria may be able to receive up to $6,495 with the Iraq and Afghanistan Service Grant. Just like the Pell Grant, the amount will change every year. A student may be eligible to receive these funds if they:

  • Aren’t eligible for a Pell Grant due to expected family contribution
  • Meet the other eligibility requirements of the Pell Grant
  • Had a parent or guardian die as a result of military service performed in Iraq or Afghanistan after 9/11/2001
  • Were under 24 years old or enrolled in college at least part-time at the time of death of the parent/guardian.

Pros and Cons of Using a Grant for Educational Costs

Many students like choosing grants as a way to make college more affordable. However, just like anything in life there are both pros and cons to using them. Benefits of grants include:

  • They don’t need to be repaid so long as eligibility is maintained.
  • Students may be able to receive more than one grant.
  • They help make college more affordable by up to thousands of dollars.
  • The application process is generally simple and straightforward.

On the other hand, some drawbacks to using grants that students should keep in mind include:

  • There are less grant opportunities.
  • Grants are generally for those in financial need.
  • There is limited funding.
  • Grants can be very competitive.
  • Grants usually don’t cover the total cost of college.
  • There tends to be more restrictions with grant funds.

If you are interested in grants then you will want to fill out your FAFSA and get in touch with your school’s financial aid office for more information.

Using Scholarships to Handle the Cost of a Higher Education

Another way that people handle the cost of education is with scholarships. Scholarships are similar to grants because they are a popular free assistance option that doesn’t need to be repaid. This option is generally offered by a variety of different sources like companies, schools, non-profits, and more. The biggest difference between a scholarship and a grant is that they’re generally based on more than just financial need. There are countless different scholarships and in fact, every year over 1.7 million private scholarships and fellowships are awarded to students.

What’s the Difference Between a Scholarship and a Fellowship

When learning about scholarships you may come across the term fellowship (as mentioned above). However, what’s the difference between these two options? While both can generally be associated with “financial aid” there is a difference between them. The term “scholarship” always means that “financial aid” is included in one way or another. On the other hand, a “fellowship” generally includes “financial aid” but that is not always the case.

Pros and Cons of Using a Scholarship for Educational Costs

There are both pros and cons that are important to keep in mind when considering if you want to use a scholarship for educational costs. Benefits of using a scholarship include:

  • They don’t need to be repaid so long as eligibility is maintained.
  • There are more scholarships available compared to grants.
  • They can better help students make education more affordable.
  • They typically look good on a resume.

Even though there are a lot of benefits, there are also some drawbacks to keep in mind like:

  • Criteria can be subjective.
  • More research is required to find available scholarships.
  • Better scholarship options tend to have a lot of competition.
  • There may be more conditions required for maintaining scholarship funding.

There are so many different scholarships that have their own deadline and application requirements. That is why it is important to make sure you understand the scholarship you plan on applying for in-depth before you submit it.

Using Student Loans to Handle the Cost of a Higher Education

You first want to see if there is any free assistance you qualify for like scholarships and grants. If you are unable to get any of those types of assistance then you will want to check out student loans to handle the cost of education. There are two sources of student loans. They either come from the federal government or from private lenders. This is the most common way that people deal with the costs of education.

Different Types of Federal Student Loans

If you choose to get your student loan from the government you can expect to see 4 different types of direct loans:

  • Subsidized Loans
  • Unsubsidized Loans
  • PLUS Loans
  • Consolidation Loans

Direct Subsidized Loans

These are loans for undergraduate students that also deal with financial hardship. They typically need financial assistance to handle the cost of a higher education. These loans can provide up to $12,500 every year.

Direct Unsubsidized Loans

This is a loan option for eligible undergraduate, graduate, and professional students. Eligibility criteria is not only for undergraduates in financial need. That means that this is a more popular option. These loans can provide up to $20,500 every year.

Direct PLUS Loans

This is a loan option for either graduate students, professional students, or for parents of dependent undergraduate students. Eligibility is not based on financial need and unlike some other federal education loans, there will be a credit check. If a borrower doesn’t have a good credit score then they may need to meet other requirements to be eligible. The maximum loan amount varies since it is based on the remaining college costs.

Direct Consolidation Loans

Individuals that have multiple federal student loans may benefit from a direct consolidation loan. This loan option allows people to combine all of their qualifying federal student loans into a single loan with a single loan servicer.

Different Types of Private Student Loans

Instead of choosing to get a federal student loan, people can choose to get their student loan through a private lender. This means that both the type of loan and the lender of the loan is important when finding one right for your education costs. There can be a variety of specific student loans from bar exam loans, to medical school loans, to state loans, and more. You want to make sure you understand the loan terms when reviewing options. There are a variety of lenders when it comes to private student loans. However, some popular options are Sallie Mae, Citizens Bank, College Ave, Discover, and CommonBond.

Pros and Cons of Using a Student Loan for Educational Costs

Even though student loans need to be repaid, they can still have other benefits like:

  • Can be easier to get compared to grants and scholarships.
  • Typically provide more funding.
  • Funding can be used on other expenses besides tuition.
  • Paying these loans off can help build credit.

There are some nice benefits, but there are also some drawbacks to be aware of like:

  • Loans need to be repaid.
  • Interest rates can be a lot to handle.
  • These loans can damage your credit if not handled responsibly.

Commonly Asked Questions About Student Loans

Since student loans need to be repaid and can be complicated to understand, many students have questions that you may have as well.

When Will You Need to Repay Your Loan?

The repayment requirements of your loan will vary depending on which one you get. Federal student loans allow students to begin payments once they graduate, leave school, or change their status to less than half-time. Private student loans are generally due while still in school but that’s not the case every time.

What is Student Loan Forgiveness?

Student loan forgiveness allows students to no longer be responsible for repaying their student loans. It may also be referred to as cancellation or discharge depending on the reason. This is an option that only federal student loans are eligible for. People may be able to get student loan forgiveness if they teach in a low-income school for five years, if their school closes while the student is enrolled or soon after, and more.

How to Apply for Student Loans?

The application process will also vary depending on your lender. If you have a federal loan then you will first need to submit your FAFSA. For private lenders, you will typically need to handle the process like a normal loan application so you will need to submit your financial documentation to begin. However, your specific lender may have a different application process so you want to check with them.

Overall

There are plenty of ways that a person can choose to handle the cost of education. People can consider grants, scholarships, and student loans. Students will first want to fill out their FAFSA form to see what financial assistance they may be eligible to receive. Popular federal grants that people can benefit from include:

  • Teacher Education Assistance for College and Higher Education (TEACH) Grants
  • Pell Grants
  • Federal Supplemental Educational Opportunity Grants (FSEOG)
  • Iraq and Afghanistan Service Grants

Besides grants, scholarships are another source of educational assistance that doesn’t need to be repaid. There are a variety of different scholarships that may be available so they will typically require more research in order to find ones that you may be eligible for. Finally, another popular way that people handle the cost of education is with student loans. These loans can come from either the federal government or a private lender. Students typically choose federal student loans first because they tend to be easier to qualify for and offer more support to students. Different types of federal student loans include direct:

  • Subsidized Loans
  • Unsubsidized Loans
  • PLUS Loans
  • Consolidation Loans

Regardless of how you choose to handle the cost of education, you will also want to take advantage of available resources. Your school’s financial aid office will have information you need that can help. You may have more support in handling educational costs than you realize.