Overview
This is a simple step-by-step guide to help you find your way through the process of paying for college. It isn’t meant to be a reference for all things financial, but rather to give you a rough idea of how to think about paying for school.
Simply put: start early, pay attention to federal deadlines, and don’t be afraid to blend several loan options to get yourself the best deal. Oh, and study hard.
Start Early
It seems that every time you open a newspaper or turn on the TV, you hear that college costs are going up. Way up.
So it’s never too early to begin. Relatives can set up a 529 college savings plan when a child is born, and some do. As college gets closer, hold family discussions to determine how much will be available to the student to pay school bills. There may still be time to set up a 529 college savings plan if you haven’t already, and set aside funds for the remaining months or years before bills come due. Finally, get familiar with deadlines and eligibility requirements for financial aid applications, and learn about alternative funding options . (But since you’re on this site, we think you’ve got that last one covered.)
Know What You Owe
When you think about college costs, what comes to mind? Tuition, room and board, right? That's daunting enough. But there's a lot more to college life.
There are other education-related expenses for you to consider—like books (textbook prices are outrageous, if you want our 2 cents), lab fees, course materials, a computer. Then there are things like campus transportation and parking. Travel to and from college. Late night pizza delivery. Well, maybe you’re on your own for that last one.
Scholarships & Grants
Scholarships and grants are key financial resources that students and parents should look into to fund college education. Why? It’s FREE MONEY! From someone else’s pocket. Even just a few hundred dollars in a scholarship from your local chamber of commerce can buy your books for the first semester. Apply for all the scholarships and grants you can before even looking into a private student loan.
To find scholarship and grants, use your high school resources, or check out sites like fastweb.com and scholarships.com. Filling out all the application requirements can be time consuming. But roll up your sleeves and do it. It’s worth it in the long run.
Federal Aid First
Okay, it’s a bear, but you’ll need to fill out the free Federal Application for Student Financial Aid (FAFSA) form. It's a government form that does the math on how much your family ought to be able to contribute. You send it in and you get a report back telling how much money you can expect to receive—some of that money is a gift that you never need to pay back, and some is in the form of loans for parents or students, with interest rates subsidized by the government.
The FAFSA site also has worksheets and information about those federal grants (Pell), and federal loans with lower rates (Perkins, Stafford, PLUS).
Loans from People You Know
Asking people you know for loans to fund your education can seem daunting, but it’s really not that bad. Although you’ll probably have to pay them back, with interest, such “peer-to-peer” loans have lots of benefits over private bank loans. They can have below market interest rates, flexible repayment plans, and payments can deferred or forgiven at the lender’s discretion.
We’ve heard about a company that does loans like
these. What was its name? I can’t remember. It’s on the tip of my tongue... oh, yeah, Virgin Money!