7 Items to Consider When Paying for College

Jun 22, 2012

Although the upcoming school year may be the last thing on your mind right now as we are right in the middle of summer, but it may be something to think about. Especially if you or your kids are headed off to college in the fall and you are wondering how you will pay for it. There are many factors and options to consider when looking to fund higher education. Your situation will greatly affect the best options for you.
  1. Fill out the Free Application for Federal Student Aid (FAFSA). This will inform you whether you or your child is eligible for the Federal Pell Grant Program. This program provides need-based grants to low-income undergraduate and certain postbaccalaureate students. Even if you do not qualify for the Pell Grant, FAFSA is a requirement for the Federal Direct Loan program. It will also allow you to find out if you qualify for Federal Work Study.
  2. Of course attending a less expensive school is the easiest way to "afford" college. Attending community college for a year or two is a great option for this. Especially if your college student can live at home while attending, saving you money in room and board. What you will want to be sure to check into is transfer credits. Be sure the college you plan to attend after will accept credits from the particular community college you plan to attend.
  3. Check into scholarships. Although it may be too late to apply for a lot of scholarships in the fall currently, it is worth checking with the particular college you or your child will attend to see if they have any special scholarships that he or she may be eligible. There may be opportunities through a selected major or an organization he or she joins.
  4. Work part-time. Another great way to off-set college expenses is for the attendee to work part-time. A part-time job may help cover food and utility expenses if the student does not live at home. It could also help pay for books, which keeps you from having to use saved or borrowed money for that inevitable expense.
  5. Student loans. Taking out a student loan is no longer the easy decision it once was. With interest rates increasing and a tough economy making it harder to find good jobs, it has become much harder to pay these loans back. Before taking out a student loan, look at ways to cut costs first by using the options mentioned above. This will allow you to borrow only the minimum amount needed. It is also important to note that you do not have to take the full amount of a loan offered to you. The National Association of Student Financial Aid Administrators (NASFAA) recommends that your monthly payments not exceed 8% of your estimated gross income after graduation.
  6. Federal vs. Private loans. If borrowing, it is best to look at Federal loans first, as they typically offer lower interest rates and have more flexible repayment options. If you decide to look at private loans, be sure to price shop. A great resource for this can be found at http://www.simpletuition.com/student_loans_home. The financial aid department at you or your child's college is also an excellent source for information.
  7. Deducting student loan interest. Currently, student loan interest is a tax deduction and up to $2,500 in loan interest can be claimed. This deduction will continue to be available; however, beginning in 2013 the deduction will revert back to an old law in which student loan interest will only be deductible for the first 60 months of repayment. For more specifics on tax deductions, it is best if you consult your tax adviser.
Obviously there are many other things to consider as well, such as your current financial situation, what college you or your child is planning to attend, college major, job prospects, etc. The above can be used as a general guideline when looking at ways to fund college. NASFAA is another great resource. The goal is to get the education you need without getting yourself into a financial situation you cannot handle in four years.