Paying for College: Government Loans, Grants, and Scholarships

What Are the Differences Between the Three?

As students prepare to graduate from high school, college looms large in their minds and the minds of their parents. One of the main concerns about college is how to pay for it. Many students feel overwhelmed when they see what the next four years of their education will cost them. If students can’t pay for college themselves (and with the rising cost of tuition, who can?), there are three options: government loans, grants, and scholarships.

The first thing students should do to qualify for any of these three is fill out the Free Application for Federal Student Aid (FAFSA). This form is required by nearly every college and is often the basis of the student’s financial aid package. The FAFSA determines the amount of federal student loans, federal work-study, grants, and some college scholarships. The FAFSA can be completed on the internet at www.fafsa.ed.gov.

It’s important to note the differences in the types of financial aid students may receive. Government loans are just that, loans. They will have to be paid back after the student graduates. Typically, these loans have a six-month grace period following the student’s graduation, but if student drops out of school for more than one semester, they may have to start paying back their loans during the time they aren’t in school. Parents can also take out loans to help their children through college, and these loans generally have a similar six-month grace period.

Students hear a lot about consolidating their student loans, and this is an option recent graduates will definitely want to take advantage of. Consolidating takes all of the loans a student has acquired over their college career and combines them into one loan. It also locks in the loan’s interest rate, so the rate will never change no matter how long it takes a student to pay off the loan. Be aware, however, that the six-month grace period may be disregarded by some loan companies if a student consolidates immediately after graduating. Be sure to ask about that when considering a consolidation company.