How Financial Aid for Full-time Students Works

Full-time Financial Aid: Loans

Student loans are less preferable than scholarships or grants, but they're the most reliable means of paying for college.
Student loans are less preferable than scholarships or grants, but they're the most reliable means of paying for college.

They have to be repaid, sure, but student loans for college are still a viable and often-used means of paying for higher education.

As with grants, the federal government gets in on funding college tuition through loans. The U.S. government offers two types of loans to students, Stafford Loans (open to most college students) and Perkins Loans (created to help students in exceptional financial need). Both of these federal loans are paid to the student through to the college or university the student is attending. These loans can be relatively small compared to the costs of tuition, so they're generally used to bridge the gap between a family's contribution and any scholarship or grant dollars and the rest of the money needed to attend college. The U.S. government also offers PLUS loans, made to parents rather than the student.

Federal student loans are classified in two ways: subsidized or unsubsidized. Depending on financial need, the government may subsidize a student loan. A federally subsidized loan is one where the government pays the interest on the loan while the student remains enrolled in school. An unsubsidized loan is like any other loan. Interest accrues while the student is enrolled in classes.

Student loans can also be taken out from private lenders, like banks. Because the fees, emphasis on credit history and rates associated with private student loans can resemble traditional loans like you'd get for a house or car, it's recommended that a borrower turn to a private lending institution only as a last resort. This is not to say that private student loans are a bad thing. On the contrary, compared to traditional loans, they usually have much lower interest rates and generally defer payment until a period after graduation. With both federal and private loans, these deferments last usually three to six months following graduation. Fortunately as a full-time student, you won't have any trouble proving you're still enrolled largely enough to stave off your creditors until graduation. This can get a bit murky for part- and part-time students.

It's a good idea to shop around for a private student loan. Banks offer competing student loans with varying rates and terms. A good place to look for both federal and private student loans -- along with scholarships and specialized college savings accounts -- is the Sallie Mae Corporation. Originally a Congressionally chartered corporation created to expand access to student loans in 1972, the company went public in 2007. These days Sallie Mae manages about 10 million student loans in the U.S. [source: Andrus].

If you still need some extra dough to make it to college, we've got a few more ideas for financial aid on the next page.