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Financial Aid Basics

Financial Aid Can Make College Affordable

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It comes as no surprise that a college education can cost an arm and a leg these days. While college may be expensive, thankfully there are numerous sources of financial aid available to ease the pain. Financial aid comes in two forms: money that is gifted, such as grants and scholarships, and money that is borrowed.

Grants and Scholarships

First, let’s take a look at some of the most sought after types of financial aid. Grants and scholarships are valuable because this is money that is given to a student with no obligation to pay it back. In other words, it is a gift. Grants can be given on either the federal, state, or school level. The two most popular federal grant options are the Pell Grant and the FSEOG.

Federal Pell Grant. The Pell Grant is a needs-based grant to provide financial aid to low-income students for postsecondary education. Eligibility is determined as part of the FASFA application process. For 2007 the maximum grand available per student is $4,050. The amount for the reward year of 2007-2008 increases to $4,310.

Federal Supplemental Educational Opportunity Grant (FSEOG). The FSEOG also provides assistance for students with exceptional financial need. This program is funded by both the federal government and the school offering the grant. Like the Pell Grant the eligibility will be determined in part by filing a FAFSA application.

Scholarships. A scholarship is like a grant in that it does not have to be repaid. Unlike grants, scholarships don’t necessarily have to be provided to those with a significant financial need. There are athletic, merit-based, ethnicity-based and even institutional-based scholarships. With such a wide array of scholarships available, it is best to check with your local school or online at FastWeb to determine what options are out there.

Loans

Aside from grants and scholarships, one of the most widely available sources of financial aid comes in the form of student loans. There are two primary sources of student loans: federal and private loans.

Federal Loans. These loans provide the greatest source of college education funding today and are backed by the government. The two primary types of federal student loans are the Stafford and Perkins loans. Both are similar, but the Perkins loan is provided in addition to those who have an exceptional financial need. There are federal loans available for both undergraduate and graduate students.

Private Loans. If you have exhausted your federal loan availability and need to borrow more money, you’ll probably be looking at some private loans as well. Private loans come from a variety of sources such as your bank, credit union or other third-party. These loans may be more difficult to obtain due to credit history, higher interest rates, or less favorable repayment options.

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