Paying for College
by Carol Braun
November 18, 2008
Paying for college isn't easy. Tuition costs are outpacing
inflation rates and an unsteady economy adds to the stress. A
recent Sallie Mae/Gallup study shows that the average family covers
nearly 40 percent of college costs by borrowing. Be sure to use
scholarships, grants and other funding sources before turning to
loans. Using loans without understanding them could lead to a
financial burden for you and your student down the road.
Private lenders, states and the federal government make student
loans. Each has advantages and disadvantages associated with them.
State loan programs vary, so check what is available in your home
state.
Federal loans offer a number of advantages, including easier
repayment terms, lower interest rates and deferment options should
your student choose to go back to school. The Free Application for
Federal Student Aid (FAFSA) serves as the application form for
federal loans, which include subsidized and unsubsidized Stafford
loans and PLUS loans for parents. The FAFSA becomes available
January 1, so be sure to complete it and submit it early to ensure
your student receives his or her fair share of aid. Award letters
will come directly from each school to which your student has
applied for financial aid.
Private student loans are an alternative, but generally have
higher interest rates and less flexible repayment terms, while
requiring a credit check and possibly a co-signor to share the
burden if the student defaults. Private lending resources have
tightened up recently. Since late 2007 many lenders have stopped
making private student loans, forcing many students to seek other
sources.
The Department of Education's Federal Student Aid Gateway is an
informative student loan source. Be sure to check it out. And if
your teen isn't ready for college yet, browse the FAFSA4caster to
get a head start on college financing. Visit ACT's financial aid
need estimator to calculate your expected family contribution and
costs at specific colleges.
Paying for College
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