Explore Various Ways to Pay for College

Physician's Money Digest, May 15 2004, Volume 11, Issue 9

Unless you've been living in hibernation,you're well aware of therising costs of a college education.But what you may not be aware ofare the many avenues available to helpfinance that education.

Financial Aid Relief

New York Times

According to a report, if you're willing to take the timeand do a little legwork, you can reducethe cost of that college education considerably.It starts with applying forfinancial aid (see www.finaid.org formore information). Don't assume thatyou will not qualify. As the article pointsout, a College Board study found thatstudents received more than $105 billionin financial aid in 2002. State grantsworth $5.6 billion were awarded during2002 and 2003. And Pell grants, aimed atlow-income students, accounted for 11%of all aid in 2002.

The most common education loan isthe Stafford. This is geared to studentswhose parents list them as dependentson their federal income tax returns.Students can borrow $2625 during theirfreshman year, $3500 during sophomoreyear, and $5500 for both their junior andsenior years. In addition, they do nothave to begin repaying the loan until 6months after graduation. And if morefunds are needed, the federal PLUS loanallows parents to borrow the rest.

Students can also enroll in their college'swork-study program to help fundtheir education. Work-study programsenable students to earn money towardtheir education. The jobs are usuallyrelated to the student's academic area ofstudy or are public interest–type jobs.Most pay minimum wage or higher.

Times

According to the article, anotheroption for students is to take out privateloans. These private loans can comefrom a number of sources, but are mainlyprocessed by large banking institutionssuch as Wells Fargo and Fleet. Thisis becoming an increasingly necessarytrend, due mainly to the rising cost oftuition at many schools, and studentsoften use private loans to supplementtheir federal loans. The EducationResources Institute reports that privatestudent loans now account for morethan $5 billion. Similar to the Staffordloan, repayment doesn't begin until 6months after graduation. The term ofthe loan is typically 15 years, but can goas long as 25 years. Just remember thatthe longer you string out the loan, themore interest you will pay.

Community College Transfer

Times

If your child is not married to the idea of getting their entire education at a 4-year university, you might consider yet another option. According to the article, more students are keeping costs down by attending a community college for 2 years and then transferring to a 4-year school. Doing so could save you thousands of dollars a year.

The key here, however, is to makecertain that the 4-year institution ofchoice will accept the credits completedat the community college. Many universitiesnow have agreements with communitycolleges. DePaul University inIllinois, for example, has agreementswith 22 community colleges. This way,students know upfront which creditswill or will not be accepted.

From a financial aid perspective, youcan also receive a break if you have morethan one child in college. If you are fortunateenough to have two childrenattending the same college, you can reallypush for a price break. For example,according to the article, Seton HallUniversity in New Jersey offers a 10% discountto each child attending at thesame time. And DePaul University offersone child a free semester, which representsa 25% savings.

A wide range of financial assistancetools are available to help you financeyour children's college education. But ifyou don't ask, you might never know whatyou could have saved.