Student Loans: Choosing a Lender

Choosing a financial aid program is an important aspect of your academic program. Federal and private loan programs offer a variety of financial aid options.

As the cost of higher education increases, many students are relying on student loans to meet expenses. The US Department of Education estimates that for the academic year 2008-2009, it will provide more than $83 billion in financial aid. The Department will provide 60 percent of all student loan funding this year, with the balance funded by private lenders. Your school's financial aid office can help you with the financial aid application process.

FAFSA: The Gateway to Financial Aid Programs

The Free Application for Federal Student Aid (FAFSA), which is available online, allows you to apply for all federal student loan programs. In addition, your school can also use the information submitted by you on the FAFSA to qualify you for private, community, and state loans, grants and scholarship opportunities. The FAFSA is the master application for financial aid programs. It's important to know that funding for all forms of financial aid is limited so it's important to file your FAFSA as soon as possible after January 1 of the year you plan to start college, and each year thereafter. Even if you think you may not be eligible for all forms of federal financial aid, you should file the FAFSA so that your financial aid office can better counsel you about your financing options.

Comparing Federal and Private Lending Programs

Federal and private student loans are available for a wide range of educational programs, including technical and vocational training, undergraduate degree programs and graduate and advanced professional degree programs. Here are some pros and cons to consider:

Federal Student Loans

• No credit report required.
• FAFSA application used by schools to determine eligibility for all financial aid offered by your school.
• 6 or 9 month grace period after graduation before repayment begins.
• You can roll all of your loans into one consolidation loan, which can lower payment and increase convenience of repayment.
• Undergraduate students can borrow $5,500 to $12,500 each year depending on eligibility; graduate students can borrow up to $20,500 annually.
• FAFSA form must be completed online and resubmitted for each academic year. It is lengthy and requires extensive financial and personal information.

Private Lenders

• Credit and income verification is required.
• You may have a co-signer if you haven't established credit.
• Private lenders may require immediate repayment.
• May offer consolidation for multiple loans.

It's important to understand all terms and conditions of any financial aid options you're considering, and to avoid borrowing more than you need.

About the Author
Karen Lawson spent more than twenty years in the business world before returning to college. She used student financial aid programs while earning her MA degree in English at the University of Nevada, Reno.