Money for College: Financial Institution vs. Private Funding

You can seek to money for college from both financial institutions and private funding options. Each institution will have benefits. Financial institutions include the federal government loan programs, banks and other lenders. Private funding will come through private scholarships, endowments and individual lending partners. Depending on what you are looking for in a loan, you will be able to locate the appropriate option from this wide range. 

Federal Loan Options

Federal loan options are often the least expensive loans, but they happen to be the hardest to qualify for in a number of ways. First, the least expensive loans are offered on a need basis. If you are getting assistance to pay for college, then you will not likely qualify for the major discounts. Federal student loans offer benefits down the line such as flexible repayment schedules and options to consolidate. However, they do not assist in covering living expenses. They also require you to reapply on a term-by-term basis, meaning you will not have the security and stability of loans guaranteed for the full time you attend school.

Banks and Lenders

Banks and lenders are slightly more flexible in terms of your application than federal loan programs. You will be judged based on your ability to pay as determined through your income and credit score. Since students tend to have low incomes and low credit scores, the student loan programs offered by lenders will be more understanding to these circumstances. However, you may still be expected to make loan payments while you attend school or immediately following graduation. Rates tend to be higher than on federal loans, and there are less flexible repayment options. The main advantage of loans from banks and financial institutions, though, is the fact they may cover living expenses and other needs while you are still a student.

Private Scholarship Funds

Your school may offer private funds through a scholarship opportunity. If so, this is likely your best option for funding. Scholarships and grants never require repayment. You will likely be required to submit an additional application, attend interviews and fulfill other criteria to gain the funds. Once you are granted the scholarship, you will be required to fulfill certain criteria while at school, such as a minimum GPA or a certain major. Scholarships may provide a living expense stipend, but you may also need to seek an additional small loan in order to pay the cost of living while at school.

Independent Lenders

There of a host of private individuals and extremely small institutions that provide scholarships and loans for students. Churches, nonprofit organizations and other local groups give out small scholarships. Private individuals who have available funds may also be willing to make loans to students on interest. The main problem is these people are hard to locate. You can contact your local Better Business Bureau or Chamber of Commerce to ask about private lenders providing student loans in your area. You will likely find these are the most flexible lenders, catering a loan specifically for you, but they may have the highest finance fees of any of the options.


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