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Wednesday, October 14, 2009

Finding financial aid

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Scholarship Basics -- What You Should Know About Free Money For College

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To some students and parents, the word "scholarship" is just another one of those confusing college terms: student loans, FAFSA, tuition and fees, EFC, grants, and work study. Little do they realize that knowing more about the scholarship process could save them thousands of dollars when trying to cover the cost of their education.

What are scholarships?

Scholarships come in a variety of forms, but are generally considered to be "free money" for college. Unlike loans, scholarships do not have to be repaid to the scholarship provider. Some scholarships are awarded directly to the student in the form of a check, while other scholarships are written out to the student's college or university. Several different types of providers issue scholarships: clubs and organizations, charitable foundations, businesses, schools, universities, government agencies, and others.

Who can get scholarships?

It is a common misconception that scholarships are only for straight-A students. In reality, there are all types of scholarships for all types of students, including those with less than perfect academic records. Some scholarships are for athletes; others are for students planning to study in particular fields; and others for community service. Some scholarship providers just want to reward students for living in a certain city or state! Students also mistakenly believe that only college-bound high school seniors can apply for awards. Scholarships are available for all levels of college study, from freshman undergrads to graduate and PhD students.

How do students find scholarships?

Finding scholarships can be a very time-consuming process, but not if students use a reputable and accurate scholarship search service on the Internet. There are several online resources for finding scholarships for college. Students can also ask their high school guidance counselors about any local or state awards that they qualify for. Students should contact the financial aid office at the college or university they plan to attend to learn if they qualify for any awards provided by the school.

When should students look for scholarships?

Scholarship application deadlines vary greatly. There are thousands of scholarship programs with spring and summer deadlines, and thousands more with fall and winter deadlines. The key is to never stop searching for new scholarship leads, even after beginning the freshman year in college. A good rule of thumb is to continue searching for scholarships for the duration of the college career.

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For college kids and kids entering college -- and their parents -- navigating the minefield of financial aid is a huge challenge. As the number of outright aid grants falls, student loans play an ever-larger role in putting kids through college.
These loans come in many varieties. Some have very attractive provisions and guarantees, but others can spell trouble for even the most responsible young adults. Need money for college? Use FastWeb's free scholarship search to find information on more than 600,000 scholarships!

The cream of the crop

The federal government provides the best student loans. The most common form of federal loan is the Stafford loan, which supplies money either directly from the federal government, or through a private lender.
The primary benefit of Stafford loans is that their costs and interest rates are regulated by law. That means that the fees you'll pay when you first get a loan -- including origination and default fees -- can't be more than a certain amount, recently around 2.5%. New loans also carry fixed interest rates that are usually pretty attractive.

In addition, some Stafford loans are subsidized by the government, meaning that the government pays the interest while the student is in school. In contrast, on an unsubsidized loan, interest accumulates while the student is enrolled, resulting in higher payments once loan repayment begins.

Another federal loan is called the Perkins loan. Reserved for students who have the greatest need, Perkins loans have no origination fee and an even lower fixed interest rate.

Many parents are also eligible for federal loans for their kids' education. Known as PLUS loans, these generally have somewhat higher rates and fees than Stafford and Perkins loans.

$3.4 Billion in Free Scholarships.

The bottom of the barrel

At the other end of the spectrum are so-called private student loans. Students can get these loans from a variety of private lenders. Large banks usually offer them, and there are also specialty lenders that focus on student loans.

Unlike federal loans, terms on private loans vary widely. Some lenders offer rates below their prime lending rates; others have rates that go into the high teens. Origination fees also come in a wide range, with some lenders charging as much as 12% just to take out a loan.

Students and teachers save up to 80% on software!

Your best strategy

It's important to get the best loan deal you can. With college costs rising far faster than inflation, students can take on tens or even hundreds of thousands of dollars in debt while they earn their degrees.

And it's difficult to fix the credit problems that can result from taking on too much debt. Because of changes to bankruptcy laws, it can be incredibly difficult to get rid of student loan debt -- even when you have a good reason. The consequence of these changes is that students and parents must be just as careful when considering student loans as they would be with credit cards or any other type of debt.

It's most important to understand which kind of loan you have -- the same lenders offer several types of loans, so it's easy to get confused. Federal loans tend to offer better terms than private loans.

In addition, thinking about college as an investment may make it easier to weigh the costs involved with education. A college education increases earning power, but a more expensive, big-name school may not enhance a student's prospects enough to justify the pressure of higher debt. A less expensive school may supply the flexibility to pursue the same wide variety of career options, and perhaps the same opportunities, after graduation.

Whatever you decide, student loans can be a valuable tool to get your degree. If you avoid the pitfalls along the way, a student loan may be the right decision on your path to success.

Find Scholarships Today!

Mr. Dangerfield is an I.A.P.D.A Certified Debt Specialist whom has worked in the finance industry for over a decade. He manages and is the author of "A Dangerfield Manifesto" and co-founder of SMG Holdings, the parent company of Squad Music Group, Dangerfield Artistic Entertainment SMG Publishing and Taboo Dangerfield Publishing
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