Congratulations on being accepted to college! Now the time has come to figure out how you are going to pay the college bill! At this point hopefully you have received your financial aid award letter from the Financial Aid Office at the college that you are planning to attend! It is important to stay in close contact with that office and maximize any financial aid opportunities that are available through the college (including federal, state and institutional financial aid sources).
Navigating the college financing process and figuring out how to pay the college bill can be a difficult process, however, there are many options available and we offer a few suggestions as to how to approach the process. Be sure to take into consideration all of the college costs that you need to account for during the entire first year of college. Costs will include tuition, room and board, books, personal expenses and transportation and in many cases a laptop and related school supplies. Make a list of all the costs that you need to cover for the whole year so you have a solid sense of what to expect. Then subtract all awarded financial aid sources from the total cost. The balance is the additional amount that you will have to come up with for the year to cover all college costs. There are a number of resources available to pay the college bill, and several articles on this site are devoted to examining the different options available to families.
Families can utilize savings, monies in 529 plans, or can borrow against the equity in their home. In addition, colleges typically will offer a Tuition Payment Plan whereby families pay the college bill over a certain timeframe, typically over an eight or ten month timeframe. This is a low cost option which allows you to spread out payments without incurring huge interest costs like in the case of some education loans. Typically families will use money from their incoming resources to cover their Tuition Payment Plan responsibilities. For those that do not have resources available, then private education loans may be their best option.
Private education loans, also referred to as alternative loans, are credit based loans offered by lenders, such as banks, state agencies, credit unions, as well as private businesses. Private education loans are a popular option for paying the college bill; however, it is important to note that education loans do incur a cost, such as origination fees and interest expenses. Please investigate all financial aid options from the college or university, outside scholarships sources, and the Federal Direct Subsidized Stafford Loan Program(s) prior to borrowing private education loans due to the costs associated with borrowing.
Since private education loans have costs associated with borrowing, you should carefully compare the fees, interest rate, terms, repayment details, deferment provisions, and the total cost of the loan. Loan details and repayment terms differ greatly amongst lenders as well as between loan programs, so be diligent when comparing private loan details. There are many articles on this site which will serve as a guide to with regard to private education loan borrowing. Check out Private Loans and Credit, Paying for College with Private Education Loans, Applying for Education Loans, Private Education Loan Considerations, Private Loan Repayment Options, and Preferred Lender Lists.
As noted above, there are many ways to cover the college bill. Some families will use one option or a combination of several options. The good news is that many options do exist and a college education is an important investment!
Check out Financial Aid Sense ~ a practical guide about financial aid and the college financing process!