The Disadvantages of Financial Aid

The cost of college is sky-high, but colleges often go out of their way to make sure that an education is "affordable." Financial aid comes in the form of grants, loans and scholarships. While there are many advantages to receiving grants from the government or from the college directly, paying your way with student loans, scholarships and help from others may not be the smartest move in the long run.

Loans

You must pay back your student loans after graduation. Federal student loans offer low interest rates and a grace period during which you can find a job, but eventually you'll have to start making those repayments. Private student loans often have a higher interest rate, particularly if you have bad credit. Additionally, you may need a co-signer for those loans and if you are unable to pay the loan back when you finish college, it can cause a bad relationship between you and the co-signer. Depending on the amount of loans that you have to take out, you could be paying a large amount of money each month, especially when you consider all the other costs of living on your own.

Scholarships

The good thing about a scholarship is that you don't have to pay back the money that the organization gives you. However, you do have to carefully follow the rules of the scholarship and meet its requirements, such as GPA subject-area requirements. For example, if you initially started school on an engineering scholarship and discovered that business is more your thing, you would lose the scholarship, which may require you to take out further loans to pay for school.

Employer Financial Aid

Many employers offer to reimburse their workers for education that relates to the job. For example, you may get reimbursed for getting your MBA or for taking computer courses. Typically though, you have to pay the cost up front and the employer will only reimburse you based on your grade, such as 100 percent for an A, 85 percent for a B and 50 percent for a C. If you don't perform as well as you'd hoped, you may not receive the full amount. Additionally, you are usually required to stay with you employer for a certain amount of time after you complete the program, which can cause you to feel trapped.

Easy Availability

Loans for college are easily available, no matter what your credit score. If your credit is bad, you may simply have to pay higher interest rates or get a co-signer. This ease of availability can lead you to over borrow. Simply going to college doesn't guarantee that you'll get a job, especially in a down economy. Even if you do land employment, your starting salary may not be enough to cover the costs of your loan in addition to other costs of living. It may be smarter to look for colleges that offer more financial aid in the forms of grants or look for a cheaper college.