Loans For School - Finding the Right Education Loans

This article is intended for the more than 50% of college students who need some kind of assistance with paying for college. If you're like over half of all college students, though, finding good loans for school tuition is essential once you've exhausted savings, grants, and scholarships.

Before we explore some of the better loans for school, let's analyze a few of your worst options for covering your college education.

Some Poor Choices

First off, since they are so widely used: credit cards. True, they are quick and convenient. Also they can help you out in a pinch. Realistically, you have to have them to function in our society. Try renting a car or making an online purchase without one! But seriously, for financing your tuition? Only consider them if you have a rock-solid plan to pay them back. Otherwise, credit cards can annihilate you with oppressive interest rates, late charges and over limit penalties.

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Another horrible source of funds is check cashing stores. When you look at the annualized interest rates they are charging, it will take your breath away! Seriously, if you use these often enough you may never recover. Be honest with yourself, if you don't have the money right now, what makes you think you'll have it in 2 weeks? Stay clear of these places!

So how about gambling? There are lots of tempting games: poker, roulette, one-armed bandits, dice, horse/dog races, and of course the lottery. The fact is, gambling is very profitable if you're a casino owner. For you, though, this is just a really bad habit to get into. It won't pay your tuition. Don't waste your time (and money).

Then there are title loans, where you sign over the title to your car as collateral for the loan. Typically, you will only get a fraction of the car's value, and the interest rate is quite high. Many borrowers then find they are unable to repay the loan, and lose their car. If you are willing to give up your car for much less than what it's worth, why don't you just sell the car and bank all the cash? At least you'll earn some interest instead of paying it.

Some Better Choices

Once you have exhausted your possibilities for getting scholarships or grants, you'll need to hunt down the student loans you'll need to cover all the rest of your expenses. So let's have a look at some of the more consumer-friendly types of loans for school.

Basically, these fall into two categories: private student loans and government guaranteed loans. Private loans are made by banks and other institutions. These loans generally carry a higher rate of interest than the government loans. Every lender has its own rules. You might need a cosigner, and you probably will need a fairly high credit score to qualify.

Federal loans for school are generally available at lower interest rates, can be repaid over a longer period of time, and offer the option to consolidate them after completion of college.

There are three categories of government loans: Perkins loans, Stafford loans, and Grad-PLUS loans. Grad-PLUS is short for Graduate student and Parent Loans for Undergraduate Students.

While each of these programs has its own rules, they share some similarities as well. One thing they do have in common, though: you must show a need for the money in order to qualify for the loan program. For all of these, you will need to submit a FAFSA (Free Application for Federal Student Aid) form to verify your eligibility.

Should You Get a Scholarship or a Student Loan?

Well, DUH! Who doesn't like free money? A scholarship or grant is far better than a loan. You just might be surprised at how much you can get in grant money that you'll never have to repay. Loans for school can fill in the gaps when you can't get enough of the free money. Try to keep student loans to a minimum, though, and pay them off as quickly as possible to minimize your interest costs.

A final word of caution is in order here. If the starting pay in your chosen career is relatively low, try to avoid taking out more loans for school than absolutely necessary. If that is the case, you may want to consider working part time to "pay as you go" for your expenses. Many students have graduated with a debt load that proved to be a heavy burden to carry for years. If you practice frugality now, you'll thank yourself for it later.

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