Paying for College Education: What are Your Options?
Spending on your college education will likely turn out to be the most important investment of your life as it will impact your income and thereby your lifestyle in the years to come. For those of us who don’t have enough savings or financial aid to fund college, student loans would be the next best alternative to fund our higher education dreams.
Let’s discuss all of these options in detail.
Scholarships and education grants
This is ideally where you should begin when arranging funds for your university education. Securing a scholarship or education grant from the university/government will to some extent save you from student debt as you don’t need to pay these back.
While scholarships are based on either need or merit, college grants are generally provided to needy students. You can apply for college grants to both state and federal governments.
To apply for a grant, you need to submit the Free Application for Federal Student Aid (FAFSA), which helps your college determine the amount of aid you’re eligible for. This is followed by award letters from colleges that accepted your application wherein you’re notified if you’ve qualified for any grants.
A scholarship is another great way to fund your university education, and the best part—there’s no limit to the number of scholarships you can apply to. And while you’re at it, it would be worth exploring private scholarships, offered by businesses and not-for-profit organizations.
Keep in mind that it’s never too early to start researching scholarships, grants and tuition-free undergraduate courses. Take the first step: request an appointment with the financial aid officer at your school and gather information specifically related to scholarship opportunities and grants available to you.
Federal student loans
If you get a scholarship but find that it is not enough to meet the cost of attending college—it will most likely fall short, as the actual cost of college includes a lot more than tuition—consider applying for a federal loan to meet the deficit. Get an estimate of the total amount of money you’ll need to get through college and apply for the sum not covered by the scholarship/grant.
Federal student loans are government loans that come with a fixed rate of interest and flexible repayment terms, as well as loan forgiveness and income-related payment benefits. Also, you don’t have to start repaying your loan until you’ve finished college, so that gives you a few years’ head start to secure a steady source of income. Do note, however, that the interest will start accruing as soon as you’ve taken the loan, irrespective of when you’re required to start repaying it.
Private student loans
Education loans from private lenders such as banks, colleges and loan companies can help finance the college costs you have not been able to secure through scholarships, federal loans or personal finances.
Private student loans offer both fixed and variable interest rates and a choice of repayment plans. As the private student lending market has grown extremely competitive, many lenders now offer benefits such as no application/origination fees, no penalty on early repayment, etc.
When exploring private loans, compare the top private lenders feature by feature rather than go with the first lender your friend/family/colleague recommended. Arm yourself with the right information before making a decision and you might just strike gold.
Explore an online aggregator of private loan for students to compare and apply to several private lenders at once.
Other ways to secure or save funds for college:
- Studying at a public university can bring down your college education cost by thousands of dollars.
- Joining a community college is worth exploring if you wish to limit your yearly college cost to no more than $10,000 a year (including tuition).
- You can save thousands of dollars on room and board by living at home and travelling to school every day, if that is an option.
- Take a Federal PLUS loan, available to parents to borrow funds for their child’s college education. A good credit score is a prerequisite to be eligible for a PLUS loan.
- Check if your parents are eligible for the American Opportunity Tax Credit of up to $2,500 per year.
- Check with your college if you’re eligible for a part-time work-study job. This option is available to only those students who submitted the FAFSA.
An important point to remember while taking any type of student loan is that you’ll have to pay it back whether or not you complete college. So carefully consider the amount you really need to borrow, as well as the terms of each loan.