Choosing the right college can be daunting. One concern students often have when applying to college is the affordability of their college tuition. They must consider how they will obtain the money needed to pay for their college education and what strings are attached to that money. Three of the most common resources students use to fund their education are loans, scholarships, and grants.
Student loans are money a person can borrow from a lender to fund their college education that must be paid back in the future with interest. Interest on loans is an additional percentage of money owed in addition to the loan amount borrowed. Student loans can be either private loans or federal loans. Federal loans are loans sponsored by the federal government. Private loans are offered by lenders such as a bank, state agency, or credit union. Private loans have different terms and conditions than federal loans. Private loans are also typically more costly when it comes to loan repayment due to their higher interest rates.
Scholarships are another option to help students pay for their college tuition. Scholarships are an amount of money awarded based on a student’s merit, or academic success, to help them fund their college education. Scholarships do not need to be repaid, so in other words they are “free money” to help fund your education. They also do not accrue any interest costs. The money can either be awarded as a one-time amount or it can provide money throughout the duration of your college education, it depends on the scholarship. Some of the various types of scholarships are awarded for academics, athletics, community service, financial need, extracurriculars, and hobbies. Grants are similar to scholarships in that they do not need to be repaid.
In all, there are many options to pay for your college education. Make sure that you do the research necessary to ensure a full understanding of all the details associated with your college debt and loan repayments so you can choose the best option, or options, for you.
For more information about types of financial aid, visit the Federal Student Aid website.
Written by Arianna Pannarale, Financial Wellness for College Students Peer Educator, University of Illinois Extension, Spring 2021. Reviewed by Kathy Sweedler, University of Illinois Extension.