Living a Better Life® (from the editor's desk)
by Michelle Jones
You've spent years searching for the right college. Applications have been submitted. Acceptance letters are arriving in the mail. Final decisions and deposits are being made. Congratulations are in order. Now, the REAL fun begins. College is EXPENSIVE!
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Tuition, room, and board, will cost on average from $20,000 (in-state) to 40,000 (out-of-state) or even more for private or elite colleges. Now you're wondering, "How are we going to pay for college tuition?", "How do we know if we will qualify for college loans or grants?", and finally, "HOW do we apply for college loans, grants, and financial aid?"
We have four children; one recently graduated, one attending second year, and one starting this fall. Our fourth child has a few more years before graduating high school so I'm hoping maybe by then they'll offer a "Buy Three, Get One Free" deal. Wouldn't that be incredible? And so not happening.
Needless to say, we've been "schooled" in college loans for the last six years and I'd like to share a few tips with you this month to help you get started. (Next month, I will share our biggest nightmare with one of our college loan providers. Sallie Mae.)
Step One - The FAFSA
Each year the federal government offers more than $150 billion in grants, loans, and work-study funds. Over the last 6 years that our children have been in college, we have qualified for all three types of aid. They have varied each year, depending on our annual income. When my husband was unemployed, we qualified for the Pell Grant, which was extremely helpful. Grants do not have to be paid back. Loans do.
In order to qualify for these low interest student and parent loans, and grants, you will need to submit the Free Application for Federal Student Aid (FAFSA).
- The form is filled out and submitted online and only takes a few minutes, maybe 5-10.
- It is best to prepare your taxes first so you will have accurate information. Yeah, I know, more fun!
- When you fill out the FAFSA each year, you MUST include the school ID numbers (the online form includes a search feature). Your information will be sent to each school that you include so that their financial aid office will be able to assist you and process your federal grants and loans, as well as any school grants that are based on income. If the school does not have your FAFSA, they will not be able to help you with these types of college financial aid.
- If at any time if you change schools, you must log back into your FAFSA account and add the new school ID. It takes a few weeks for the information to be received by the new school so you will want to do this promptly.
- States and colleges have application deadlines for financial aid (though we certainly missed the deadlines our first year, it is not recommended). Check deadlines for your state. Many state deadlines occur early in the year, and grants are more likely to run out than federal student and parent loans. Also, check with the college financial aid office for their deadlines.
Step Two - Grants and Loans
Once your FAFSA has been processed, they will let you know what grants and loans you qualify for.
- After scholarships and grants have been awarded to your student account, you will undoubtedly have a balance. Anywhere from $1,000 - $40,000. You will need to either pay the balance due with cash or credit, or apply for loans.
- Yes, you still have to apply for the loans. The annual FAFSA serves as your legal documentation to verify what you qualify for. The actual loans have to be applied for, accepted, and promissory notes signed. They will take several weeks to process through to the student account.
- If you do not pay the balance due or arrange for the loans needed within the first few weeks of school, the student will be kicked out. Although it is common to barely make the deadline, I don't recommend doing that. The earlier you can get all loans arranged and fees paid, the better!
- This can be a stressful period of time; for students and parents. Just take one day at a time, call or visit the financial office as needed, and breathe. It will get done.
Step Three - Student Loans vs. Parent Plus Loans
Note: Private loans are not considered financial aid.
- If you are a graduate or independent adult student, all loans will be in your name. If your child is a graduate or independent student, all loans will be in their name.
- If your child is a DEPENDENT undergraduate (meaning you claim them on your annual taxes as a dependent), the initial Student Loans will be in their name, and the Parent PLUS Loans will be in yours.
- Federal Student Loans do not have to be paid back until the student is out of school (graduated or not attending school for a period longer than 6 months). When the student graduates, loans can be deferred if they are unemployed or underemployed (not making enough money to pay their bills). However, interest will continue to accrue during the deferred period of time, one year of deferment can equal $4,000 of interest, or more, depending on the amount borrowed and the interest rate. If it is not paid, the interest will be compounded and rolled onto the principal balance. Making the loan even more difficult to be paid off.
- Parent PLUS Loans will be processed for monthly payments soon after the loan money has been disbursed to the school.
- Both Student Loans and Parent Plus Loans are assigned to various loan servicers by the U.S. Department of Education (ED). You are not able to chose which company will service your loan. Note, you are also able to acquire private loans, though the federal loans interest rates are usually the lowest you will find.
Get more information about financial aid at studentaid.ed.gov for college or career school, and 529 college saving plans at irs.gov/uac/529-Plans.
And don't forget about free scholarships.
APPLY, APPLY, APPLY!!!
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Copyright © 2014 by Michelle Jones. All rights reserved.