I recommend to students that they apply for each type of financial aid in a specific order, which revealed explicitly is as follows:
- Federal Aid + Independent Grants/ Scholarships > PLUS Loans > Private Loans > Other Loans > Consolidation
I based this timeline primarily on the strength of each kind of aid that is available, and how certain types of aid cost much less than others. The bottom-line that you must understand is that private financing should be looked to as a last resort when you have exhausted all other forms of aid.
This is mainly due to the high cost of these sorts of education loans, along with their lack of repayment benefits, although the fact that they cannot easily be discharged via bankruptcy is another factor that has played a role.
Applying for Federal Student Aid, Grants, and Scholarships
Applying for federal student aid via the FAFSA should be considered as the most important step in the financial aid process, as this will make you eligible for the best federal student loans that are available, along with certain types of grants.
It is always wise to consider applying for any independent grants and scholarships that you may be able to become eligible for, as these don’t have to be paid back, and can often provide you with a substantial amount of money to put towards you higher education.
These types of independent grants and scholarships will vary greatly in regard to when you must apply, so keep a sharp look out if you want to take advantage of this kind of aid.
The following articles can give you a better explanation about completing the FAFSA, acquiring specific types of federal student aid, and certain types of grants and scholarships:
- Completing the FAFSA
- The Federal Student Aid Eligibility Requirements
- What is Financial Need? EFC?
- Federal Student Loans Overview
- Stafford Loans
- Perkins Loan
- The Pell Grant
- Other Federal Grants
PLUS Loans may technically be considered as federal student loans, but because they are based in-part on credit, and require a separate application beyond the FAFSA, they don’t necessarily exemplify the same kind of characteristics that are consistent with other sorts of federal education loans.
Because they are based on credit, have a higher interest rate than most other federal loans, but cost less than most private student loans, I recommend to students that they apply for these loans before they consider getting private financing.
Please read the following articles to get a better idea about what a PLUS Loan may be able to do for you:
Private Student Loans
Private student loans are not that much different than most consumer loans in that they are based on credit, and come with fairly high interest rates that are normally variable. They are not provided by the Department of Education, but by independent private lenders, and you must apply for them on a one-by-one basis.
You can typically borrow up to the cost of attendance via a private student loan, and the term of your loan will vary in accordance with the strength of your application, and the policies of your actual lender.
The following articles gives a good overview of the fundamental aspects of getting a private student loan:
Student Loan Consolidation
Student loan consolidation can provide you with an entirely new loan in place of your current student loan debt, and is designed to make things more convenient for you, and to lower your monthly payment amount.
How you go about consolidating your education loans will depend on whether you have both federal and private student loan debt, or just federal student loan debt.
If you only want to consolidate your federal student loan debt, you can apply for a Federal Direct Consolidation Loan at loanconsolidation.ed.gov. If you want to consolidate both your federal and private debt, you may have to get another consolidation loan from a private lender.
Read the following article to learn more about student loan consolidation:
Student Loan Repayment
Student loans are unlike grants and scholarships in that they must be paid back at some point, and when you graduate or fall out of what is considered to be “in-school” status, you will be required to begin making payments by your lender.
This process can be less arduous if you are willing to utilize the multitude of repayment benefits that typically come with most student loans.
Read the following articles to figure out how to payback your student loans the proper way:
- Paying Back Student Loans
- Repayment Adjustment Options
- Delinquency and Default
- Bankruptcy and Student Loans
Other Types of Loans
When you have exhausted all of your financial aid options, including private student loans, you may want to consider applying for other types of loans. While you should only do this as an absolute last resort option, it may be necessary if you have nowhere else to turn in order to get the money you need to pay for college.
The following articles contain information about some of the common alternatives to student loans, and other forms of financial aid: