Published July 2011. Financial aid and student loan rules change often, so some details may be out of date. Ask us about your situation.
The first college bill for the Fall 2011 semester will be arriving in many mailboxes very soon and parents know that you have a variety of options to pay that gap which is over and above the financial aid received by your student. From your own savings to payment plans to the many financing options, you can trim your overall costs by selecting the option or a combination of options that best fits your economic situation.
Let’s start with savings, if you and your student or other family members have done a disciplined job saving for college, now is the time to use those funds for their designated purpose, paying for college. By spending these specific college savings, you eliminate the need for loans and repayment of principal and intrest.
Almost all colleges offer some type of payment plan, which allows you to pay the bill in monthly installments throughout the academic year. All plans have an application fee only and typically allow you to make monthly payments over a maximum time period of 10 months, beginning in July. With only a one-time application fee, you are able to spread these payments over time and the best part is these payments are interest FREE!
Many families choose financing options such as Federal Parent Loans (PLUS), Alternative Education Loans, Home Equity Loans, etc. It is important to do your research and know the interest rates, fixed or variable, repayment terms, deferment and/or forbearance options, tax benefits, and most importantly borrow only what you need each year because most likely you will need to borrow for the next four years. For example a Federal PLUS loan interest rate is fixed at 7.9% while today’s Home Equity interest rates can be fixed or variable and range from 3-5%. Securing a Home Equity loan today could significantly reduce the interest rate compared to a Federal PLUS loan, saving you alot of money over time.
Each family siituation is unique so find the option and/or combination of options that works best for your family so you can make college affordable now and for at least the next four years.