Student Loans


Determining Your Need

Figure Out Costs

From tuition to take out, higher education costs add up! When thinking about where you can afford to go to college, remember to factor in things like:

  • If you will be far away from home, you may need to have a car and pay for insurance and gas,
  • Books and lab fees,
  • Room and board—even if you’re not living on campus, you’ll still need rent an apartment and buy groceries
  • Tuition often increases every year, so be sure to factor this in, as well.

Kiplinger’s Personal Finance and FinAid both feature calculators to determine every aspect of college financing, from whether you are saving enough to a student’s budget once in school. Use these calculators to familiarize yourself with the system and to figure out whether you’re on track.


When starting to look into student loans, FAFSA is a term that you’ll hear a lot. It stands for Free Application for Federal Student Aid. College students and parents fill out this form annually to determine their eligibility for financial aid. Financial aid includes grants, loans, and work study programs. Based on the family’s FAFSA, their Expected Family Contribution (EFC) will be determined.
If there is a gap between the expected family contribution and cost of attending college, this is considered the family’s financial need.

For example, if the EFC is $20,000 and the student wants to attend a school that is $40,000, the family’s financial need will be $20,000 per year. This need will be covered by federal and state financial aid, the prospective college’s financial aid package, and possibly even alternative student loans. Until you know your EFC, you have no idea of a school’s actual cost; if your EFC is very low, it is reasonable to expect significant aid in the form of grants and loans to make more expensive colleges affordable.

To estimate your EFC, visit FAFSA on the Web or FinAid. Keep this ballpark in mind when deciding where to apply.

Other Sources of Aid

Before tapping student loans, a few other sources of aid are available.
Saving: If you’re reading this a few years before you enter that institution, you should start saving now. Today, many programs such as Coverdell Education Savings Accounts (formerly known as Education IRAs) and Section 529 plans offer tax-advantaged ways to save for higher education. However, these sorts of plans usually have maximum contribution limits and age limits. You may also choose to save on your own which, while losing many of the tax benefits of education savings plans, puts the money more under your control and guidance.

  • Federal Grants: The federal government is the largest source of higher education aid. Federal grants do not need to be repaid, so they should always be chosen over student loans, which do need to be repaid. Two popular grants are Pell grants and Supplemental Educational Opportunity Grants (SEOGs). These are both based on need—SEOGs are for students with exceptional need. Petersons has more information on all kinds of federal and state aid.
  • Work-Study: The government also offers a need-based Federal Work Study program, whereby the government guarantees a student work paying at least minimum wage. Special aid is also available for students interested in a military career or for veterans and their dependents. FinAid has more information.
  • Scholarships and Charities: Finally, you may be eligible for specific scholarships and private funding. National businesses and charities offer significant amounts, while many smaller charitable organizations offer scholarships to local students. It may not cover the entire cost of college, but every bit helps! Go to FastWeb to search for scholarships.
    In the next section, learn more about the most popular type of student loans—those offered by the federal and state governments.

Whether You Are Dependent or Independent Affects Your Financial Aid.

Students are presumed to be dependent (relying on their parents for more than half their support) unless proven otherwise. It has become increasingly difficult to be considered independent; it is not enough for parents to simply not claim the student as a dependent on their income taxes.

Because independent students’ financial aid is determined solely on their own income and assets without consideration of the parents’, this means that independent students usually receive significantly more aid. However, for that same reason, schools would prefer students to be declared dependents. To be declared independent, a student must be at least 24 years of age and : Are there supposed to be OR’S between all these bullets- please make this more clear.

  • Have at least one dependent (other than a spouse), - does this mean that he/she has to have a child?
  • Be a veteran of the U.S. Armed Services, or
  • Be an orphan or ward of the court.

Even if a student meets the federal guidelines, however, a specific school may have more stringent rules.

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