How Can I Pay for My Childs Education?
Your first step in keeping college costs under control is to make some hard decisions about the type of school your family can afford. If you and your children are going to rely on student loans to pay part of the cost, your next step is to decide how much debt is reasonable.
Set a limit that is realistic. The average student loan debt among graduating seniors is just over $19,000. One financial aid officer says it is reasonable if a student graduates owing less than $25,000.
At the lower end, more than half of all full time students enrolled in public four-year colleges pay in-state tuition and fees between $3,000 and $6,000 a year. Therefore, a student splitting the total cost with his or her parents might reasonably borrow $12,000 or possibly less.
Once you have decided on a limit, stick with the federal student loan programs: Perkins and Stafford loans for students. Perkins loans are the cheapest, but they are available only to students with the greatest financial aid needs. For most students, Stafford loans are the best deal around. Any student can borrow at a fixed rate of 6.8%.
Interest accrues while your child is a student, but he or she does not have to begin repaying the student loans until six months after graduation. If your family qualifies for a subsidized Stafford student loan on the basis of financial aid need, the government will pay the interest while your child is in school.
Despite the advantages, many students do not exhaust the entire Stafford student loan money to which they are entitled. Some families are apparently put off by having to fill out the Free Application for Federal Student Aid (FAFSA), a prerequisite for getting a Stafford student loan.
Do not fear the FAFSA. In addition to a low interest rate, Stafford student loans come with attractive benefits when it is time to repay. For example, borrowers can defer repayment if they attend graduate school, or renegotiate loan terms to stretch out or lower their payments.
Get a list of lenders from your child’s school, or from FinAid (www.finaid.com) or the Education Finance Council (www.efc.org), which lists state-run programs. Rates and loan terms are fairly standard. Some lenders do offer attractive discounts, such as a waiver of the loan origination fee when the student loan is disbursed. Immediate discounts are better than future benefits tied to a certain number of on-time payments, a requirement that is tough to meet.
Scope out scholarships. Do not count on your child to bail you out with a full ride. However, many private schools are willing to cut their sticker price to attract the right students. The trick is to apply to schools where your child’s grades, SAT scores or outside activities make him attractive.
In addition, not every scholarship is based solely on grades. They can be based on a wide range of criteria. Make sure you research all the sources available. The chances of finding a scholarship or fellowship are quite high.
