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Guide To Student Loans | The truth about fees, loans & grants

3 STARTING salaryEvery parent wishes to save enough money to help their children with a college education that will help launch their carriers.

But with the rising cost of college education, it comes as no surprise that a growing number of students are looking for financial aid.

The key to overcome such an adverse situation is to plan ahead and try to come up with an estimate of the college expense.

This will help you to maintain a budget and build a pool of college of fund which can be used when your child begins college.

Many students are often confused about the amount of student loan they should take. Many student counselors recommend that the amount of loan they plan to take should never be more than the starting salary they expect to get. In ideal cases, the total loan amount should not be more than half of the first year’s starting salary.

To help you get a little more perspective, consider the following example.

If you estimate that your starting salary will be $40000, then your total debt should not exceed more that $10000 every year for a 4 year degree course. But given today’s economic considerations, this may not be feasible

On an average the tuition fees for a 4 year course costs around $20000 after considering the amount required for books, supplies, room and board. The rates are much steeper for private schools.

Students can reduce their expenses by aiming for scholarships and grants. But for a majority of students taking a loan may be their only option to cover for their college expenses.

What are the different types of student loans currently available?

There are many types of student loans available and you have to carefully understand the features before choosing the best one.

Below is an all encompassing guide to the different student loans you can choose from.

  1. Stafford Loans

They are low interest loans available to students under the federal loan program. Stafford loans are a life saver for students who may not be eligible for securing a private loan due to their credit history.

You can choose between subsidized Stafford loans and unsubsidized Stafford loans. If you opt for the subsidized loan then the interest will not accumulate till the time you are in college. The interest is paid by the federal government during this period.

If you choose the unsubsidized loan you have to pay the interest accumulated while you are still in college.

There is no eligibility criterion for securing an unsubsidized loan as it is open to all. But subsidized loans are granted only after a financial need is established.

Who can apply?

Any dependent or independent student pursuing an undergraduate or graduate course with a financial need in case of subsidized loan or without financial need in case of unsubsidized loan

How to apply?

Students have to fill out the Free Application for Federal Student Aid (FAFSA) which is available online.

What is the maximum loan amount you can get?

The maximum amount a student can borrow cumulatively for undergrad and graduation course under subsidized loan is $57,500 and for unsubsidized loans the cumulative total is $138,500.

  1. Perkins Loans

3 stafford-loan-debtIt is a subsidized, low interest and long term loan option provided by the federal government to students who have extreme financial requirements.

The total loan amount is made up of funds provided by the federal government and your school.

Who can apply?

Any undergraduate or graduate or professional student, who is able to successfully demonstrate an extreme financial need can apply for it.

How to apply?

Students have to fill out the Free Application for Federal Student Aid (FAFSA) which is available online.

What is the maximum loan amount you can get?

Students pursuing an undergraduate course can receive $5500 every year and students pursuing a graduate course can receive $8000 every year.

  1. PLUS loans

It is another low interest loan which is offered to parents to meet the financial needs of their children’s education. This loan is also governed by the federal government.

You must keep in mind that the onus of repaying a PLUS loan is on the parents and not the student.

Who can apply?

Any parent with dependent undergraduate student can apply provided the parents pass a credit check. If they don’t pass the credit check, they have to prove extenuating situation or find a friend or family to endorse their loan.

How to apply?

Students have to fill out the Free Application for Federal Student Aid (FAFSA) which is available online.

What is the maximum loan amount you can get?

There is no cap. You can claim as much as you need to meet the education expense which is not covered any other financial aid.

  1. Consolidation loans

It allows you to combine one or more loans taken from the federal government into a new direct loan taken from a single lender.

It typically reduced the amount of the monthly payments by increasing the term of the loan. It offers flexible repayment options and a single monthly bill. But as the tenure of the loan is increased, you may end up paying more interest.

Who can apply?

Anyone who successfully fulfills the eligibility criteria for securing a federal or direct loan can apply.

How to apply?

You will need to complete and online application form. For more information about the application process please contact your lender.

What is the maximum loan amount you can get?

The maximum loan amount will depend on your individual financial need.

  1. Private loans

3  Higher SalaryIn many cases the cost of attendance is not met by the federal student loan. This gap can be filled by taking on a private student loan.  The loan can be offered by a bank, state agency or credit union.

You must compare the costs, the terms and conditions and the interest rate before choosing the lenders.

Who can apply?

Any independent student or parents of dependent student who fulfill the eligibility criteria set by the private lender.

How to apply?

Almost all lenders allow their customers to fill an online application form. For more information about the application process please contact your lender.

What is the maximum loan amount you can get?

The maximum loan amount will depend on the cost of your college education.

Other alternatives

Apart from the above mentioned options, you can also look into Home equity lines of credit or home equity loans. They allow you to put your house as collateral for borrowing money.

 They are generally disposed off as a lump sum amount. Hence you have to arrive at the correct estimate that meets your future requirements.

Below is a table that shows the interest rates of the various student loans which you must take into consideration before making you final choice.

Type of loan

Interest rate


Subsidized Stafford Loans

3.76% 10-30 years

Unsubsidized Stafford Loans

For undergrads students it is 3.67% for grad students it is 5.31% 10-30 years

Perkins loan

5% Up to 10 years

PLUS loan

6.31% 15–30 years

Private student loan

Depends on the lender but generally ranges from 2.5%–12.0% 10–30 years

Home Equity Loans

The average fixed rate is 4.92% 10–30 years

Home Equity Line of Credit

The average variable rate 4.74% 10–30 years

What are the different scholarships and grants available to students?

Scholarships and grants are commonly referred to as “gift aid”. They are free financial aids that do not have to be repaid. In most cases, scholarships are given based on merit while grants are given based on individual needs.

  1. Scholarships

Merit scholarships can be secured by meeting or exceeding the benchmarks set up by the person or organization providing the scholarship. There are different scholarships available based on academic excellences, special talent, sports scholarships or a combination of both academic and sport.

Scholarships will bear an impact on your chances of getting other student aids. This is because the total student aid awarded cannot exceed the total cost of attendance required to complete your degree in the school of your choice.

Most often scholarships are offered targeting a particular segment of the population. For example there are special scholarships given to women or if you come from a particular background like the military.

A scholarship can either be a onetime payment that hands out a certain sum of money or it can pay your full college fees. Therefore it is worth applying for scholarships as any help should be welcomed to keep you out of student debt.

You can enquire about the scholarship opportunities from the financial aid office at the college you plan to enroll. There is also tons of useful information available online that you can explore.

Always keep in mind to check whether the scholarships offered are legitimate. Also you should never pay anyone for finding scholarships or seeking information about financial aid. This will help you to stay away from any scams.

  1. Grants

There are a variety of grants that is offered by the US Department of Education to students who have enrolled for a 4 year college course.

Below is list of the different grants you can choose from.

  • Federal Pell grants  

Details of the program

  • It is given to students who have not secured a bachelors or graduate degree.
  • The grant amount awarded depends on the financial need and cost of attendance.
  • You are eligible to receive the grant only up to 12 semesters.
  • You cannot receive the grant from more than one college.
  • If eligible, you will get the whole amount you are qualified for.
  • If your guardian or parent died in the line of duty in Iraq or Afghanistan after the 9/11 attacks, you may eligible for additional grant amount if you meet certain criteria.

How much aid can you receive?

The grant amount can be changed yearly. For the academic year 2016–17, the maximum amount that can be given is set to $5,815.

  • Federal Supplemental Educational Opportunity Grant (FSEOG)

Details of the program

  • Students who have received the Federal Pelt grant are given priority.
  • It is given to students who have not secured a bachelors or graduate degree.
  • The grant amount awarded depends on the financial need and cost of attendance.
  • It is not available in all the colleges across the county.
  • The grant amount depends on the funds available in the college you choose to pursue your education.
  • You have to apply before the deadline set by the colleges

How much aid can you receive?

The total amount received depends on your financial need, funds received from other student aids and the funds available in the college you choose. The grant amount can range from $100 to $4000 per year.

  • Teacher Education Assistance for College and Higher Education (TEACH) Grant

Details of the program

  • It is only available to undergrads, grads or post baccalaureate students who are either presently or in future willing to take the coursework that will qualify them as elementary or secondary teachers
  • You have to serve as a full time teacher in an educational institution that caters to the low income student group. You have to take classes in a high need field for a period of 4 years.
  • You must fulfill certain academic criteria and choose a participating college in order to become eligible for the grant
  • If you fail to complete the mandatory teaching service obligation, you will be heavily penalized. The total grant amount will be converted into direct unsubsidized loan that you will have to repay.

How much aid can you receive?

If eligible you can receive a maximum of $4000 a year.


Parents who take home a higher salary may find it difficult to be eligible for higher loans. Therefore the more you save, the less dependent you will be on loans.

Students, who are planning to take a federal or private loan, must first explore the various scholarships and grant opportunities available.


[PDF]Home Equity Lines of Credit – Consumer Financial Protection Bureau


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