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A Primer on Student Loans

As many high school students across the country now apply to various colleges and universities, one of the biggest factors that they (and their families) are considering is how to pay for their higher education.

According to recent report from The College Board, a non-profit association for colleges and universities, tuition for both private and public schools continued to rise in 2009. Private four-year colleges/universities are now averaging $26,273 a year, a 4.4% increase from last year, while public schools went up by 6.5%, averaging $7,020 a year. (UC expects to raise student fees 32%.)

Considering these escalating costs, there are federal options that students and parents can investigate to finance college, including:

  • Submitting the Free Application for Federal Student Aid (FAFSA) form early.  The FAFSA program gives students the opportunity to secure federal grants and different forms of state aid. The FAFSA form is now available online in students should file early, as state aid is based on first come – first served basis  in many states and many states have a limited pool of aid dollars available. 
  • Applying for Federal aid, such as Perkins and Subsidized Stafford loans. These loans are the safest and most affordable for students because the government pays all the interest while students are in school. Federal Unsubsidized Stafford loans are the next best source, as they are not based on financial need.

People Capital research shows an annual gap of $113 billion between the amount of federal aid available nationwide and the actual costs of higher education.

Besides federal aid, another option for students to consider, besides federal aid, isapplying for grants and scholarships by obtaining information at  Unlike a loan, scholarships and grants are an excellent way to garner money for school because students do not have to repay anything after college is over.  They should also check with the school’s financial aid office for scholarships/grants that are available.

If after utilizing these options students still need money to cover costs, they can carefully investigate private student loans. Though such loans don’t always offer fixed interest rates, they provide a funding option that is a lower risk than using credit cards and allows students a longer re-payment option after graduation.

Before taking out any loan, students should consider the school they plan to attend and the major to study to estimate how much they will need to borrow, how to qualify and how to afford to pay a loan back once they graduate.  Various online tools and calculators, such as our Human Capital Score, can make these variables relatively easy to compare.

Lastly, once at school, students should not forget about work-study options, as many colleges and universities offer paid positions that can be applied for once on campus.

Though there are ways to help offset the costs of higher education, paying tuition bills presents a serious challenge for many families.