So you’ve exhausted every possible lead for a scholarship, but there is still a looming gap of zeros in your education costs. You’re ready to bite the bullet and sign your name in blood to interest rates and payment plans. But what about this recession everyone’s talking about? What about that $1.6 billion loss Sallie Mae posted last quarter? Who can you trust to still give you a fair interest rate?

It’s a slippery slope and my first advice to anyone contemplating major loans right now, is buyer beware! We’ve all learned valuable lessons in the last year when it comes to adjustable interest rates. Make sure you ask lots of questions and have a complete understanding of your terms of agreement.  This is your financial life for the next 10 years; it’s not to be taken lightly.

With that admonishment out of the way, here are your jumping off points:

Subsidized and Unsubsidized: These words are bandied about endlessly, but what do they mean? In a nutshell, subsidized means the government is going to pay the interest on your loans while you’re in school, and probably for up to 6 months after you graduate. Unsubsidized means you are responsible for the interest immediately. Usually you have the option of either beginning payments on the interest immediately, or deferring them up to 6 months after graduation when you begin payments on the principle.

Federal Loans: These are the bad boys that you’re looking for.  They have fixed interest rates and are typically subsidized. You apply for these loans by filling out the FAFSA (Free Application for Federal Student Aid). There are mainly three different kinds of loans, the Perkins Loan, the Stafford Loan, and the PLUS Loan.

• Perkins: You’ll have to prove exceptional financial need, but it’s perfect for independent students. Typically it’s a 5% fixed interest rate and it can grant you up to $20,000 for undergraduate, and up to $40,000 combined undergraduate and graduate. The best bonus is that these loans could be cancelled if you go in to fields like nursing or law enforcement, volunteer for the Peace Corps. or go on to teach in a low-income school.

• Stafford: Be cautious of the Stafford because it can be either subsidized OR unsubsidized. If your family can prove less than $50,000 of gross income per year you can be approved for the subsidized version. Otherwise they may offer you the unsubsidized loan. The interest rates on this loan are currently higher than the Perkins, around 6%, but by 2011 it should be a mere 3.4% due to a government program.

• PLUS: (Parent Loan for Undergraduate Students) This is a loan designed to cover the gap between the financial aid packet that a school offers you and what you actually need, including books and room and board. It’s deceiving in its name, because you can also apply for it if you are a graduate or professional student. Interest rates are around 8.5% and vary depending who is offering, and based on your credit check. You must apply separately from the FAFSA. Look for banks and credit unions that offer federal education loans.

Private Loans: These are your riskier loans due to the fact there are no government- backed securities.  Despite private loans being a whopping 20% of the student loan market, they are not only going to be harder to find and obtain, but interest rates can vary from 8% to a terrifying 19%. These are loans from banks and credit unions that are not part of a federal student loan program, and repayment will probably begin immediately.

IATG Quick Tips:

•    Don’t procrastinate. Fill out that FAFSA ASAP!
•    Talk to your financial aid office! They can point you in the direction of your best private loan options if federal loans don’t come through.
•    Find a co-signer who can increase your credit score, it could help you out with more money and a lower interest rate.
•    Don’t get discouraged, the money is out there and you will find it.

Questions, comments, and concerns: send them my way at diane@iamthatgirl.com

photo by bill mcbain

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If you’re searching for college financing, whether for a BA, MA, etc., you may suffer giant stress headaches, erratic sleep and night sweats. Fear not. These are normal symptoms.  It all seems like an endless sea of boxes to check and forms to fill out and enough fine print to fill a bottomless pit.  I’d rather clean my toilet, scrub the grout between the tiles of my shower, or do anything other than reading the dry repetitive material about student loans and scholarships.

I asked myself how on earth a high school student is supposed to navigate these rocky waters and make wise financial decisions that will affect them for the next 15-20 years of their lives. How are teenagers supposed to wrap their minds around loans and interest rates on tens of thousands of dollars when they’ve never had anything other than a minimum wage job? It seems socially irresponsible to be merrily waving the next generation down the drain of debt.

I sound depressingly pessimistic; I know. That’s how I felt when I first googled the word “scholarship” and started sifting through the search results. I left a message for my editor, ready to cry “uncle!” The websites seemed so interested in gathering information about me that I was certain they would sell my name to every mailing list imaginable. They were difficult to navigate and reduced me to describing myself in means of ethnicities and grade point averages. I was frustrated and discouraged by the fact that I didn’t seem to possess any qualities worth receiving money as each search offered alarmingly slim leads.

Before my editor called me back and before I officially threw in the towel, a divine beam of light shone down on me. I came upon www.scholarshiphelp.org. I swear the angels started singing as I gleaned a brand new understanding of grants, financial aid, and scholarships written in a comprehensible way and on a website that is simple to navigate. This is where you should begin your search in order to help you understand the basics and beyond. (They are willing to guide you in everything from searching for schools to writing your essays.)

What this experience illuminated for me was that this is not a topic meant to fit into a 500 word article. Rather, this is the gigantic elephant in the room that every student is ignoring because it happens to be a very boring elephant. Unfortunately, it’s also a very important elephant so we all better get used to its monotonous voice and confusing legal terms and figure out how to be friends. I’m pledging to you, readers, to tackle this subject with you and address as many questions and concerns about this process as humanly possible. In other words, there is much more to come on this topic. (Thank goodness it is finally becoming more enjoyable than cleaning my toilet.)

If you have any tips, websites recommendations, questions, concerns, or just need to vent about how you don’t even want to go to college anymore because you can’t figure out how to pay for it, shoot me an email at Diane@iamthatgirl.com.

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