Professional Medical Billing and Coding Courses: Finding the Loan that Works for You (Part 1 of 2)
January 14, 2013 by Holly Cassano
(Editor’s note: This is part one of a two-part series on finding financial aid for your education in medical billing and coding)
By Holly Cassano, CPC
In my last three-part series I discussed a variety of topics for the potential and/or returning student that included some financial aid information and I wanted to delve into this topic a bit more in depth and discuss in a two-part series the difference and options for both loans and grants/scholarships for those of you who need some further guidance in this area.
Most individuals who make the decision to pursue higher education for the first time, or are returning to school to do so, need some form of financial aid. Traversing the “Financial Aid Gauntlet,” as I call it, can be a daunting task. We are lucky that the federal government has recognized this and thus has provided numerous resources where you may apply for financial aid for your education.
A grant/scholarship, of course, is the best mode of receiving financial assistance, but it is not the only mode. The most common form of student loans come to you from our federal government and are awarded to thousands of students annually.
Types of Financial Aid
Financial aid is available from the government in many different forms and is granted on a needs basis, as well as on merit and academic performance from the student. Many places of learning provide a variety of resources to assist students with this process for state and financial aid.
Overall financial aid from the federal government is assessed and doled out based on earned tax dollars and salaries of people in conjunction with aggregate sales and federal taxes and subsequently grants aid to students in the form of low-income loans and grants.
Primary Difference between Grants and Loans
- Grants tie the amount paid to the applicant based on how well the student performs during the year. The student must maintain a certain grade level, as the grant money does not have to be returned to the government.
- Low-income financial aid packages have to be paid off upon a student’s completion of a program/course.
Government Student Loans
The first thing students should be cognizant of when looking for financial aid is to seek those loans that will have low interest rates and offer several repayment options. Student loan rates offered by the federal government do just that. These loans are offered at lower interest rates versus those offered by private lenders.
The following government-funded loans are some of the most popular choices for students today:
- Perkins loans are designed for students who demonstrate extreme financial need and undergraduates can also apply. The rate of interest is fixed at 5% and are subsidized, so the government pays interest on the borrowed amount. Students can get up to $4,000 annually and the total amount they are eligible for is up to $20,000. For those wishing to pursue a graduate program, they can get up to $6,000 per year and a total of up to $40,000.
- To apply for Perkins loans, students must meet an eligibility requirement. All in all you must be a U.S citizen, demonstrate financial need, and have a high school diploma or GED qualification.
- Students start repaying nine months after graduation and have 10 years to fully repay the loan
- Offers a fixed interest rate loan from a low of 3.4% and is available in two packages — subsidized with the 3.4% interest rate and financial need must be proved, or unsubsidized with a 6.8% interest rate, and the student doesn’t have to report financial information for approval; however, the interest starts accruing on an unsubsidized loan after the first installment
Federal Family Education Loan Program (FFELP)
- Provided by private lenders, such as banks/credit unions/savings & loan associations, and are guaranteed from default by the federal government.
Federal Direct Student Loan Program (FDSLP) loans
- Direct Loans provided by Direct Lending Schools are provided by the government directly to students and parents.
- Subsidized and are granted on basis of need
- Interest in this type of loan will not accrue while students are enrolled in a program but repayment starts six months after graduation
- Unsubsidized Stafford Loans are not based on need. Repayment starts six months after the graduation and interest accrues while students are in school
- See more information on Stafford loans here.
Parent PLUS Loan
- Parent PLUS Loans are government student loans that can be taken out by parents wishing to supplement personal finances/children’s financial aid
- Credit checks are required for approval
- Repaying Parent Loans commences two months after the funds are dispersed and you have up to 10 years for full repayment.
Tip: If you’re applying for a Stafford or PLUS loan, you’ll need to supply the lender’s lender code. The lender code is a six-digit identification number assigned by the U.S. Department of Education to lenders that participate in the Title IV higher education loan programs. See more information about lender codes here.
No matter which type of loan you choose, the federal government publishes a great handbook called the FSA Handbook, which offers a complete guide to assist students with the financial aid process. A word of caution for downloading — it is more than 1,000 pages, but chock full of what a student needs to successfully complete applications for the various types of government financial aid resources. Please click here to access the FSA handbook PDF.
Additonally, the U.S. Department of Education’s StudentAid.ed.gov site contains links to information organized by year in school.