Kentucky Higher Education Assistance Authority
Financial Aid Tip of the Month, July 2010
Many sources of financial aid are available to help college-bound students pay higher education expenses, including federal and state grants, scholarships and Federal Stafford and PLUS Loans. In addition, merit-based scholarships and need-based grants are often available at the local level.
All of these programs may help ease the burden of paying for college. However, sometimes these sources are not enough to cover all the costs. When that happens, parents and students may take advantage of private student loans, also called alternative loans.
With the crisis in the credit markets, private loans are harder to qualify for this year than in past years. Some lenders have stopped offering student loans, and nearly all of those that still provide the loans have tightened the requirements.
One thing to be aware of is the amount that may be borrowed. The interest rate will largely depend on the borrower’s credit rating. Instead of the 4.5 or 6.8 percent interest students pay on Stafford Loans, they may have to pay much higher interest rates on a private loan. In addition, many lenders require students to have a cosigner, and some require the college to certify that the student needs the loan.
Students are encouraged to do some research before committing to any loan. They should compare the loans offered by various lenders to find the best possible deal. The KHEAA Marketplace, online at www.kheaamarketplace.com, lets students compare loans from several lenders to find the one that best meets their needs.
To learn how to plan and prepare for higher education, go to www.gotocollegeky.gov. For more information about Kentucky scholarships and grants, visit www.kheaa.com; write KHEAA, P.O. Box 798, Frankfort, KY 40602-0798; or call (800) 928-8926, ext. 6-7372.