By Malia Keirsey
$1.3 trillion. No, this is not the amount that the federal deficit has grown over the past year. It is the amount of student loan debt that Americans shoulder right now. And it continues to grow.
$37,172. This is the average amount of student loan debt for students who graduated with Bachelor’s degrees in 2016. And for those who go on to grad school, it only gets worse.
It’s a crisis, and many economists say it will be the next major financial crisis America faces. With this amount of debt, homes and new cars are not purchased; there is no money to invest in their futures. The impact on the general economy is potentially devastating.
As you consider financing your education, you have to look at types of aid with an eye toward your future. The goal, of course, is to minimize the debt you accumulate and must pay off. Here are the options you have.
Sources of Financial Aid – Public and Private
- The Federal Government
You already know that the feds are the biggest source – loans, grants and even through funding of some work-study programs, particularly those involving important research.
- Your State
There is also money available in many states – grants, scholarships, tuition assistance for those who qualify, and loans. This pre-supposes that you attend a public university in your state, however. Still, it is worth checking out. Lots of students don’t and they lose out.
- Aid from the Institution
This is common among private colleges and universities, as they are able to use endowments meant for this purpose. This is in the form of grants, scholarships, and work-study programs, and do not have to be paid back. If you can get as much as possible in this form, you can really reduce your final debt amount.
- Private Aid
If you can qualify for this type of aid, you are in luck. These are grants and scholarships that come from private, usually non-profit organizations, although corporations are getting in on this act too. The best source for these is now a google search. You would be surprised to learn how much funding is available, often related to your ethnic background, your religious affiliation, other heritage factors (e.g., children of Iraq and Afghanistan military killed in service), your financial situation, etc. Exploring these opportunities takes times but can be well worth it.
In many instances, you will be required to write essays as a part of the application process. Do not blow these off. If you are not a skilled and creative writer, you will want to find some help. Find a writing service that specializes in helping students with application and gives a college essay help. Your piece must be amazing and must stand out among some stiff competition.
Types of financial Aid
Now that we have talked about sources of financial aid, let’s look a little closer at the types. Your goal is to come out of college with as little loan debt as possible. So, before you dive headlong into huge loan obligations, consider all of the possibilities that are open to you.
The lovely thing about grants is that they don’t have to be paid back. Grants can come from public sources (federal and state governments) or from private sources. Grants can be based upon need, upon merit, or upon specific student type (e.g., minority, women, disabilities). Competition for grants can be fierce but that should not deter anyone from going after them. Here are some examples of grants that students can get:
- Pell Grants are awarded by the federal government, usually at the undergraduate level, and amounts are based upon the student’s financial situation, the tuition costs of the chosen school.
- FSEOG are federal grants for students with high financial need. The letters stand for Federal Supplemental Educational Opportunity Grants. These are usually awarded by the school that has a specific amount of money to grant.
- TEACH (Teacher Education Assistance for College and Higher Education): If you are pursuing a degree in education, and if you are in a high-demand field or willing to work in low-income urban areas, you should pursue this grant. You must commit to a specific number of years in teaching to prevent having to pay it back.
- Iraq and Afghanistan Service: Students who parents/guardians died while in service in these two wars are eligible for amounts of grant money.
Scholarships are actually like grants, and most are provided by institutions themselves or by private organizations or enterprises. These are usually based upon academic performance, ethnic background, athletic or another talent, religious affiliation, or other criteria. The larger the scholarship amount, the greater is the competition. If you go for many of these types of awards, you may be required to write an essay as a part of the application process.
Now, this is the area in which students must proceed with caution. Loans must be paid back, and the amount a student borrows will impact his/her life upon graduation. While loans provide you with quick access to the money you need for your education, they do come with interest. There are several types of loans:
- Federal Loans: these are the most common type and are divided into categories of subsidized and unsubsidized. Subsidized loans are given to students who can show financial need, and the repayment terms are a bit better. Interest on these loans is paid by the government while you are in school. Unsubsidized loans do not come with such a benefit. Interest accumulates while you are in school and is added to the loan amount, even though you don’t have to begin paying back until after you graduate.
- PLUS: These loans go primarily to students in graduate and professional programs. They come with interest, so be sure to check out the details.
- Perkins Loans: these are loans given to students in both undergraduate and graduate programs, and are based solely on financial need.
- Private Loans: These should be a last resort. They are loans provided by banks and other lending institutions. Generally, they come with a higher interest rate, and there are no provisions for lowering the rates or any forgiveness for certain conditions, as government loans may provide.
Speaking of loan forgiveness, you should do the research. There are some career paths which will give government loan forgiveness or reduction. Some positions in education and health care, for example, are eligible, under conditions of specific employment.
There are some on-campus positions which are funded by the federal government, specifically so that students may earn a portion of their college costs through work. Jobs at off-campus locations are also sometimes available. The larger the student body, the more positions, but also the more competition. Pay can also vary widely.
Particularly at the graduate level, there are assistantships available which will help pay for tuition costs. These involve providing help to professors, teaching lower level classes and a variety of other tasks. These are valuable positions, and the competition is high.
These are also opportunities for graduate and professional students and do not have to be paid back. Usually, these are provided by private enterprises and are used for students engaged in education or research. They are given in the form of stipends which students can then use as they choose. There are some fellowships awarded directly by schools, but these are not as common. And some come with strings attached regarding post-graduate employment.
Some General Advice
Here are some tips as you think about student aid, especially accumulating that loan debt.
- Borrow only what you need, not what you can. It’s tempting to have that extra cash on hand, but you will pay dearly for it later on.
- Graduate on time. If you are working on a Bachelor’s, make sure that you get out in four years, even if you have to take some overload semesters. Every semester adds cost and debt.
- Be realistic. Take a look at the employment prospects in your chosen field, especially the salary forecasts. A good “rule of thumb” is this: Do not borrow more than the forecasted annual salary of an entry-level position in your field.
Malia Keirsey is an enthusiastic writer and guest contributor. She has finished the University of Chicago with master’s degree in Sociology. Now she’s working as freelance web designer and blogger. Her main topics of interest are writing, digital marketing and education. Follow @MaliaKeirsey on Twitter.