College is both an exciting and daunting time for you and your child. The rising prices of college tuition, the stress of student loan applications, and learning how to maximize on the capabilities of financial aid has become a commonly shared feeling of anxiety amongst parents and children.


Read on for three simple steps to assist you with the student loan application process and help you and your child start off on the right foot.


1. Understanding Your Financial Aid Options

First and foremost, what types of financial aid are there? Financial aid can be broken down into three categories:

  • Scholarships: Scholarships are a financial reward given to support a student’s educational efforts. There are hundreds of thousands of scholarships offered each year through universities, private grants and local businesses.
  • Grants: Grants for education may come from either state or federal governments. Oftentimes, these grants will be provided to the university directly. If a student meets certain criteria, they may be awarded the grant. The grant is normally applied to the student’s tuition & room and board. If there is subsequent money remaining on the grant, it will be given to the student to pay for other collegiate expenses directly.
  • Loans: Loans are granted by the Federal Government or private lenders. Loans can be applied to expenses such as room and board, tuition or textbooks. Loans accrue interest and must be paid back in full.

2. Filling Out a FAFSA Application

FAFSA (Free Application for Federal Student Aid) is the largest provider of student financial aid in the United States. Annually, the FAFSA provides more than $150 billion in federal grants, loans and work-study. 


Once you submit an application, FAFSA will assess the amount of money a family is expected to contribute to a child’s tuition. Factors such as income, mortgage, number of children and acquired assets are features that are incorporated into their calculation. 


The FAFSA application for federal aid is extensive, but the reward far outweighs the time put into applying for the application.


3. Preparing for Repayment Options

Familiarize yourself and your child with the following terms when discussing how they might pay back their student loans:

  • Interest Rates: Interest is money a lender is paid in exchange for the borrowing of money. Federal loans for an undergraduate degree accrue an average interest of about 4-6%. While this is relatively low in comparison with other loan types, the numbers can add up if you have a relatively large loan to pay back over several years. Students may write off their student loan interest on their itemized taxes by receiving a 1098-E form through their student loan provider.
  • Consolidation: If you or your child is overwhelmed with student loan payments, consolidation might be an option.  By consolidating & refinancing your loans, you can conjoin several small loans and debts into one monthly payment (this is dependent on your lender).
  • Repayment Options & Settlements: Many students are nervous to call and debate their payment options. However, most lenders have flexible repayment policies based on your income and financial needs. Contact your lender for monthly balance and deferment options.
  • Grace Period: A grace period is the amount of time a student has until they must start making repayments on their student loans. Most grace periods last about 6 months post-graduation. While many students wait until their grace period to start saving and learning about their student loan repayments, it’s important to understand budgeting for repaying your student loans while still in college.

Before signing up for any loan, make sure you understand all the terms and conditions. By following this quick guide, you should be able to navigate the murky waters of student loans a little easier and find yourself acing your, and your child’s, financial future at the start of the new school year.


Kimber Carmichael via ASmarterChoice