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Types of Financial AidWhen savings and earnings aren't enough to meet your education expenses, financial aid is designed to fill the gap. Financial aid is money that is given or loaned to you to help pay college expenses. The single largest source of financial aid is the federal government, followed by state governments, colleges, and private organizations. Financial aid falls into three general categories: Free Aid, Work Aid, and Loan Aid. FREE AID Scholarships are awarded for a variety of reasons, including academic achievement, financial need, community involvement, organizational membership, and ethnicity, to name a few. Scholarships do not need to be repaid and are typically awarded on an annual basis. While the federal and state governments award some scholarships, the majority of funds are offered by private organizations. WORK AID LOAN AID Federal Perkins Loans are available to families with extreme financial need. These loans carry a fixed 5% interest rate, are funded by the federal government, and are administered by the school. Federal Stafford Loans are low-interest loans for students enrolled in college at least half time. Interest rates are fixed at 6.8% beginning July 1, 2006. The funds borrowed can generally be repaid over a 10-year period.
Federal Parent PLUS loans allow parents to borrow up to the full cost of education less other aid received, for students enrolled at least half time. The amount borrowed can generally be paid back over a 10-year period. The interest is capped at 8.5% beginning July 1, 2006. Federal Graduate PLUS loans allow graduate students enrolled at least half time to borrow up to the full cost of education less other aid received. The amount borrowed can generally be paid back over a 10-year period. The interest is capped at 8.5% beginning July 1, 2006. Institutional loans are made available by individual colleges. Each school determines its own loan characteristics and eligibility requirements. Check with the financial aid office at the college you will attend for more information. Private loans are provided to students by banks and loan companies. Each provider determines its own loan characteristics and eligibility requirements. A good rule of thumb is to look for private loans that offer in-school payment deferment, high credit approval rates, and flexible repayment options. |
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