Guest Post from Jack Wallace, Director
Felicitations! Enjoy the graduation festivities and cherish the memories of your child’s K-12 educational experiences.
Hopefully by now you have survived the U.S. Department of Education’s (“ED”) new and “simplified” Free Application for Federal Student Aid (FAFSA) experience. Was it more stressful than simple?
Have you received an Award Letter from your child’s college of choice to see what your financial aid package looks like and determine how much you will have to pay out of pocket or need to finance with student loans? Remember some schools include Federal Student Loans on the Award Letter. A Federal Student Loan is a loan (not a grant or scholarship) and must be paid back with interest.
If you haven’t received your child’s tuition bill yet, it will arrive in your mailbox or inbox by the first week of July. If you’re one of the lucky ones who have already received the Award Letter, what is your Estimated Family Contribution for the upcoming year? Will you pay cash, use an established 529 plan or do you need a Federal or Private Student Loan?
If you are going to use Federal and/or Private Student Loans, the first thing you need to know is how much you need to borrow for the full academic year. Remember to include tuition, room and board, books, laptop, and other permissible expenses such as bus, flight, or train ticket costs for trips to/from school for various holidays and vacations for the entire academic year.
How to pay for college without incurring substantial amounts of debt
Even if you have a 529 plan to pay for college expenses, make sure your child goes online to see if there are any additional grants or scholarships, they may be able to receive. Two national resources to check are www.scholarships.com and www.fastweb.com. Don’t stop there. Ask your employer if there are any scholarships for children of employees? Are there benefit programs that permit you to pay your child’s educational expenses with pre-tax dollars like the IRS Code Section 127 re: educational assistance program for employees? Give your Human Resources Department a call to find out any educational benefits that they may offer. Are you or your spouse a Veteran? Does your child qualify for any Veteran education benefits?
Which student loan is best? Should I have my child take out a Federal Student Loan to begin to build their credit?
It depends. What is your FICO/VantageScore? If you have Excellent Credit (your score is 720-850) you may have two loan options. ED offers a Parent Loan for Undergraduate Students, also known as a PLUS loan. The fixed interest rate effective July 1, 2024, is 9.08%. With the Origination Fee, the Annual Percentage Rate (“APR”) is over 10%. If you have a credit score of 720-850, you may want to get a Private Student Loan through a bank, credit union, community bank or a non-profit student loan company. Private Student Loans have a fixed or floating rate. Interest rates for some fixed rate Private Student Loans currently start as low as 4.25% with no Origination Fees, depending upon your credit score. Make sure you weigh the pros and cons of both types of loans. It is not just about the APR.
Having your child take out a Federal Undergraduate Subsidized Student Loan will help them build credit and take an active role in paying for their education. ED’s Direct Loan Program offers undergraduate student loans with attractive interest rates and benefits. Go to www.studentaid.gov for additional information on the Undergraduate and PLUS loans.
This year, more than ever before, we need to be “educated consumers” when deciding on a college! ED’s FAFSA processing has caused delays at the college financial aid offices in getting the Award Letters out putting families in a position of having to commit to their college of choice without having gotten the Award Letter. Historically, May 1 is Decision Day, the day graduating high school seniors must commit to the college they plan to attend in the Fall. However, this year, the date was extended beyond May 1 and some schools extended it into June. Every school is different so check with your school of choice.
This year the definition of a “safety” school is not only one your child can get into, but also one the family can afford. This may necessitate attending a four-year public rather than a four-year private college for the first year. Or attending a community college for a year then transferring to the college of your child’s choice once the Award Letter has arrived and an educated decision is made on affordability and financing. Check out community colleges in your State.
Last but not least, if your child feels strongly about their first choice, and the Award Letter hasn’t arrived, or the financial aid package isn’t enough to make the school affordable, don’t hesitate to have your child call the college, tell the financial aid office their school is their first choice, and ask if the college can provide more aid. Can’t promise anything but remember “Ask and (maybe) you shall receive”!
Hope this helps. Good luck!
Jack Wallace, Director
Thank you,
Glenda, Charlie and David Cates
