Student Loan History And Where They Came From

Today student loans are almost a given for college kids heading off to school. Few parents have the financial resources to pay all of the tuition for their children, and so most students fill out a FAFSA and apply for loans. This has not always been the case, however. Student loans are quite a modern invention.

The first recorded student loan program was developed by Harvard University in 1840. These early student loans were private loans that were not funded by the government. In 1935 the state of Indiana’s General Assembly passed a law that provided student aid to students who had high test scores on their college entrance exams. This led to the formation of the Indiana State Financial Aid Association, or ISFAA, which was followed by the opening of the first Financial Aid office in Indiana University. Soon other colleges joined the ISFAA, and Indiana students had a new way to pay for school.

On October 4, 1957, Russia launched the first successful satellite into space. This had a huge impact on the history of financial aid in America, because the American government suddenly realized that they were in a race to put the first person in space. They realized that they only way to succeed in this race was to ensure that as many high school graduates as possible attended college, a feat which was out of the financial resources of many. With guidance from the ISFAA, the federal government created a working financial aid program.

After World War II, Congress passed the National Defense Education Act. This act introduced the Perkins Loan, a low-interest student loan that is provided to low-income students and has a 10-year repayment period. This was the first federally backed student loan, and more would soon follow. In 1963 the Health Education Assistance Act provided loans for students pursuing degrees in medical and health fields. This was followed by what is now known as the Federal Work-Study Program, a program that allows the federal government to pay the wages of working students.

By the end of 1965, Most of the student loan programs we use today, such as the Stafford Loan, Work-Study Program, and Perkins Loan, were in place. As the cost of education continued to rise, the government introduced the Parent’s PLUS loan program in 1981, a program that allowed higher-income families to get assistance in paying for school. Today, these loan programs allow many students to pursue an education when they would otherwise be unable to, making them a valuable resource to our country as we strive to continue as a global leader.

What You Need to Know About Student Loans

As times continue to get tougher for the average American, student loans to pay for college expenses are almost unavoidable. As you consider your loan options, whether you are sending yourself or your child to college, there are some considerations to make. Make sure you know what you are getting into before you sign on the dotted line for your next student loan.

First, remember that you will not have to start paying off the debt immediately after you graduate if you get the right type of loan. Make sure you choose a student loan that offers a “grace period” that you can use to find a job before you have to make payments. After all, you cannot start making payments until you have a job, can you? This is usually six months. Most federal loans have this built into their programs.

Also, look at the information about the interest charged on the loan. Some loans will not charge interest while you are in school. However, you may have to provide written notification that you are still attending school in order to stop the interest charges. Make sure you know exactly what is expected of you.

Remember, your student loan and college grants can be used for all school-related expenses. However, there is little tracking done, so you may be tempted to spend the money on unnecessary things. For instance, if you are awarded a $3,000 loan, this does not mean that you can suddenly stock your dorm room with the latest and greatest gear. You need to set that money aside for tuition, room and board, and book expenses. Also, try to save money whenever you can, because your loan award is going to be used up very quickly.

Once you are out of school and in your job, you will have to start paying back the loan. Each month you will be required to make a minimum monthly payment. However, you should pay more than this whenever possible. The sooner you can pay off your debt, the more extra spending money you will have each month, and the less you will pay in interest over the life of the loan.

Taking on tremendous amounts of debt at the start of your life as an adult may seem like a bad idea. However, if this is the only way for you to get a college education, it is a good risk to take. Your college degree will open multiple doors for you in the professional world, increasing your income, and giving you a better life as an adult.