Youth Resource

Understanding Student Loans: The Basics

For most youth and young adults, student loans are a necessary part of college, even when a financial aid package includes scholarships. In choosing loans and loan amounts, there are many options and factors to consider that can have significant long-term impacts. This tip sheet provides some important information to keep in mind as you prepare to pay for college.

Before I take out a loan, have I considered whether there are scholarships, special state programs, or grants available?

Some states make financing college easier for students who are homeless or were in foster care by providing tuition and fee waivers, in-state tuition, and priority housing. You can find a list of these states and their relevant laws here.  Additionally, there are multiple scholarship opportunities available to individuals who experience homelessness, including SchoolHouse Connection’s Youth Leadership and Scholarship Program.

What are loans?

Loans are typically money given by an individual, agency, or other institution that the borrower must pay back. Loans usually consist of the original value amount (the “principal”) plus additional charges (the “interest”) that the borrower pays the lender until the original value is paid back. The interest is expressed as an annual percentage of the principal (for instance, 5%), and is charged and accumulates (“accrues”) until the loan is repaid.

What are the different kinds of loans?

There are several types and subcategories of loans, varying by provider, interest rate, and the terms of repayment.

The most important grants available for higher education are the Federal Pell Grants.
They are awarded to undergraduate students who are eligible for federal student aid programs and who have filled out the Free Application for Federal Student Aid (FAFSA). The general eligibility requirements include financial need, being a U.S. citizen or eligible non-citizen, and enrollment (full- or part-time) in an eligible degree or certification program at a college or career school. The amounts awarded can change yearly and depend on:

Questions to consider when choosing loans:

How do I apply for loans?

To apply for federal loans, students must fill out the FAFSA, which determines how much you are eligible to receive. The FAFSA is available online or in paper form starting on October 1st of the year before the loan will be issued. Students must fill out the FAFSA form every year that they are in school in order to stay eligible for federal student aid. Many states and colleges have specific deadlines for applying for financial aid. A complete list of deadlines is available here. Students can also check with their institution’s financial aid office about their specific deadline. Completing the application before the deadline ensures full access to grants and scholarships.

*For unaccompanied homeless youth* If you are an unaccompanied homeless youth, you do not need to include your parental income or signature on the FAFSA. You will need a determination that you were unaccompanied and experiencing homelessness in the year prior to applying. If you are in high school, your school district is required to help you obtain verification. You also can get verification from certain homeless services providers, or from your financial aid administrator.

What do I do if I have problems filling out the FAFSA or interpreting my award?

Each college or university has a financial aid office. Some handle phone calls and emails well, but for others, it is better to walk in for a face-to-face meeting. In either case: