Student loans are a great source of financial aid for students who need help paying for their education. Because a college education is considered a sensible long-term investment, student loans are often considered to be good debt.

There are generally three main avenues to obtaining financing for a college education. They are:

• A scholarship or grant is free money that doesn't have to be paid back. This type of financing is harder to qualify for and is generally limited in dollars available, but certainly worth going after.

• Government loans come in several different programs such as Stafford, Perkins and PLUS. Most are financial need based and generally credit is not a factor in qualifying, except PLUS borrowers are generally required to pass a credit check.

• Private loans can be obtained through a variety of commercial lenders and are available based on credit qualifications.

Credit

Students and families with good credit will generally receive lower rates and smaller loan origination fees than those with less than perfect credit. There are a number of student funding options that are not based on your existing credit. Many students may need a co-signer with good credit to get a loan.

Scholarships and Grants

Apply for grants and scholarships like your life depended on it. Scholarships and grants may be available, but if you are one of the lucky ones to receive one, it likely will not cover all your expenses. Scholarships are often, but not always, based on the financial need of the student. While you should try to fund your college career with primarily grants, scholarships and savings, this is not always possible. The FAFSA will make you eligible for federal loans and grants. You should exhaust all scholarships, state grants, and campus work-study before applying for a student loan.

Federal Stafford Loans

Stafford Loans are the largest and by far the most popular government loan program. Stafford Loans are low interest rate loans that the student borrows in his or her own name. Stafford Loans are regulated and guaranteed against default by the federal government. These loans must be repaid. However, if you are depending solely on the Stafford Loan because of your credit, the loan awards are often meager. An advantage to the Stafford Loan is that you can reapply every school year.

• Subsidized Stafford loans provide low interest rates and are available to students who demonstrate financial need based on income and other information provided on the FAFSA.

• Unsubsidized Stafford loans provide low interest rates and are available to all students regardless of financial need (although the FAFSA still must be filed).

Federal Perkins Loans

Federal Perkins Loan is another government subsidized student loan that does not require a credit check. Perkins loans are available for both undergraduate and graduate students. Perkins loans are need-based loans fixed at 5 percent interest that is paid by the government while students are in school and do not require payment of interest or principal until nine months after graduation. So, if you have to go the loan route, federal student loans, such as Stafford loans or Perkins loans are your best option. There are no origination or other fees or charges for Perkins loans.

Federal PLUS Loans

Parent Loan for Undergraduate Students (PLUS) is a low interest loan that enables parents to borrow money to cover the education expenses of a child. PLUS loans require a credit check and, in some instances, an eligible cosigner. PLUS loans are generally limited to the amount needed to cover your education expenses each year minus any other financial aid.

Private loans

Private loans, such as those provided by Bank of America, Chase or Wells Fargo, and many other lenders, fill in the gap between the amount received from federal loans, grants and other forms of financial aid. These loans are based on your credit rating and carry a higher interest rate than federal loans.

After Graduation

Most of the time, loan repayment will not start until around six months after students have graduated.

FAFSA (Free Application for Federal Student Aid)

FAFSA Financial Aid Forms are required for all federal student aid and are strongly recommended for all students. You will need to fill out the FAFSA before March 2 of the year you plan to begin attending college in the fall. The FAFSA will make you eligible for federal loans and grants. Additionally, schools use the information provided on the FAFSA to determine eligibility for other types of financial aid provided by the federal government, from your state, or from the school itself.

In summary here is a list of the program features of federal and private providers plans.

Federal student loans:

• Usually have lower interest rates

• Often include federally-subsidized interest payments while in school

• Provide options to postpone payments

• May have a longer repayment term

• Offer easier credit requirements

• Generally require completion of FAFSA

• Usually require school certification

• May offer borrower benefits in the form of interest rate discounts or rebates

Private student loans:

• Don't require completing the FAFSA

• Send the funds directly to you, not your school

• Can help when federal student loans aren't enough to fund your entire education

• Have interest rates and fees that are determined by the lender and often depend on your credit rating

• May require the borrower to have a co-signer, if the student does not qualify alone

• May or may not have deferment and forbearance options depending on the lender

• May offer borrower benefits in the form of interest rate discounts and rebates.

• Can cover college related expenses including previous semester fees

• May let you defer payments until six months after graduation

We can't stress enough that you need to research financial aid in all its forms: scholarships, grants as well as federal and private student loans.