Paying for college: How to hit the books without emptying your wallet
It’s your last year of high school – or maybe you’ve already graduated - and the college thing is really heating up. Until now, it’s all been about getting good grades and thinking about where to apply. But that’s just the tip of the iceberg, my friend. The real fun starts when you realize it takes more than brain power to get into college. It takes some pretty serious cash. But before you start freaking out about paying for college, remember this: There are lots of resources available to help you pay for college. The hard part is knowing what’s available, where to look, and how to choose what’s right for you. So we asked Steven Dow a few questions to help you understand your options for paying for college without emptying your wallet.
Q: What options are available to students for financing their college education?
A: Aside from savings and income, there are a number of ways students can get funding for college, including:
- Work study
- Federal Student Loans
- Private Student Loans
Q. That’s a lot of options! Where do you start?
A. Most students start off by applying for scholarships and grants since you don’t have to pay those back. It’s basically free money! Depending on how much money you receive from these options, you can then apply for Federal Aid to see if you qualify for financial assistance or federal loans. After that, you can apply for a private student loan to fill in the gaps. Check out the other types of aid here: http://studentaid.ed.gov/types
Q: What’s the difference between federal and private student loans?
A: Federal student loans are issued by the government; private loans are issued by banks or private lenders. To apply for a federal student loan, you have to fill out a FAFSA (Free Application for Federal Student Aid). You’ll need your family’s income and asset information to apply. Federal student loans have low, fixed interest rates with annual and lifetime limits (i.e., you can only borrow so much per year, and over your lifetime.)
Use the FAFSA4caster to estimate how much federal aid you may qualify for. To apply for a private student loan, you simply fill out a loan application to apply. To increase your chances of getting approved and/or a better rate, you can have someone co-sign the loan, such as your parent(s). With private loans, you can choose between different “terms,” such as “deferred payments,” which simply means you get to wait until you graduate college to start paying back the loan.
See Webster’s private Sallie Mae student loan option here.
Q: What are some ways you can save money on a private student loan?
A: Well, the first thing is to exhaust all your options like scholarships and grants first. Then, shop around for best deals on private loans. If you decide to apply, see if you can add a cosigner with good credit, like your mom or dad, to lower your rate.
Some other ways to save are:
- Opt for a shorter repayment period to reduce your interest rate. This will increase your monthly payment, but reduce the overall cost of your loan.
- Set up an automatic withdrawal from your checking or savings account to make loan payments. Some lenders lower your interest rate when you do this.
- Make pre-payments if possible. Anytime you can throw extra cash toward paying off your loan, do it!
Q: What documents do I need when I apply for a private student loan?
A. Typically you’ll need to provide:
- Personal information like your Social Security Number, address, phone, etc.
- Proof of income (like pay stubs)
- Copy of your driver’s license
- School information
Q: Are there any advantages to getting a student loan vs. a regular personal loan to pay for college expenses?
A: Yes! For one thing, student loans save you money in a couple ways:
- Parents can cosign. If you add your parent or other co-signer to your loan, you can get a better interest rate.
- You can defer loan payments until after you graduate. With a personal loan, you’ll need to start paying it back right away.
Q: When should I apply for a student loan?
A: For federal loans: Click here to see deadlines for the FAFSA by state.
For private student loans: Before you apply, make sure you know how much federal aid, scholarships and other funds you’re getting. This way, you can figure out exactly how much you’ll have to borrow. Then, apply early enough to give your bank or lender time to process your loan and get the money to your school by its tuition deadline.
Q. What else should I know about applying for student loans?
A. It’s usually a good idea to apply for the cost of a full year of school. (As opposed to getting a loan for each semester.) Your school will contact the bank or lender about when they need the funds, and your loan interest won’t start accruing interest until classes start.