Student Lending

Need help paying for college? Here is a little information on available financing.

When it comes to big-ticket items, you have to pay for in your lifetime, it does not get much bigger than higher education. Indeed, predictions are that college tuition will increase by about twice the rate of general inflation, year over year. This would mean, in 20 years, the average annual cost of tuition for a four-year public program would rise from today’s $5,132 to $19,859 and the cost of a private program from $20,082 to $77,711.

Nevertheless, help is at hand. For want to be college students (and their parents) who could benefit from a financial leg up in this department, here is a primer on what is available.

What types of aid are available? The ideal sources of funding for your child’s education are scholarships and grants that do not require repayment. Even those lucky enough to qualify rarely receive enough to foot the whole bill. Fortunately, there are several types of student loans. They are distinguished by various factors, including their rates of interest, repayment terms, and maximum available amounts and whether the onus of repayment falls on the student or his or her parents.

Some principal sources of student financial aid are:

· Federally funded student loans

· Parent loans

· Private loans

· Other loans

· State aid

· Institutional assistance

First, let us talk about a Federal student loans. The U.S. Department of Education’s Federal Student Aid (FSA) programs provide nearly 70 percent of all financial aid for American students. FSA is available to students — both undergraduate and graduate — enrolled in eligible programs at participating schools. In most cases, they are granted based on a student’s need.

Stafford loans are long-term, low-interest loans regulated by the federal government. They are given to students (rather than to their parents) and must be repaid with interest following the completion of their education term.

How much can one obtain from a federal student loan? A student’s financial need is calculated based on his or her expected family contribution (EFC), academic level and the anticipated cost of his or her education (including tuition, room and board, and books). Worksheets that show how the EFC is calculated are available at www.studentaid.ed.gov/pubs, or you can request a free copy of the EFC Formula by calling 1-800-4ED-PUBS, and asking for the Federal Student Aid Handbook.

When would you need to pay your student loan back? Students are required to begin paying off their Stafford loan debt six months after they graduate, or after their enrollment drops to less than half time.