The College Board recently reported that the average cost of tuition and fees for the year of 2017 - 2018 was $9,970 for state residents attending a public college in their city. If you chose to attend a private college, the fees and tuition would be approximately $34,740 and if you chose a college out of your state, you would pay approximately $25,620. Colleges base their tuition on what makes up their academic year. If you attend a college in your state, the tuition and fees will be much lower for you than for someone who is attending from out-of-state. In addition, depending on the major you are enrolling in (ie. engineering, pre-med, computer science) your tuition will be higher than if you chose fine arts or another major. Added to the cost of tuition and fees is housing and meals, books and supplies, personal expenses and transportation. Depending on where you live, these costs can fluctuate. Attending a local college or university in your state and living at home will be the most economical for you. If you choose to live on campus, the average cost for 'room and board' ranges from $10,800 to $12,210 for the academic year. Textbooks and supplies, again depending on your major can average $1,250. Your living costs such as transportation, clothing, entertainment, etc. average from $2,730 - $3,270. Adding all of these costs together, a college student is looking at spending per academic year approximately $25,290 for an in-state public college and approximately $50,900 at a private college. And that is just for one year. Multiply that by the number of years your degree takes to complete and the numbers become overwhelming.

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How does one pay for college - it is an investment in your future, but the cost can be formidable if you do not have help from your family. Before the financial crisis in 2010, the main source of student loan financing came from the private lending sector. In order to qualify, students needed a good credit score, credit history and a job as repayment began as soon as the funds were disbursed. As most students were just graduating from high school, they did not fit the lending criteria required by private lenders. 90% of all applicants required a cosigner to qualify and interest rates were high. During the financial crisis more and more students defaulted on their loans causing lending institutions to raise their eligibility requirements to the point that very few people qualified. Student loans started to grind to a halt. The government realized that by investing in college education they were really investing in America's future and strengthening the American economy. The Federal government passed laws that nationalized the student loan programs making college affordable once again to all Americans.

TYPES OF STUDENT LOANS

There are several types of student loans that are available to those wanting to attend college. They can be broken down into two categories: federal government loans and private loans (banks, online lenders, credit unions). We will discuss federal student loans first as all private lenders recommend filling out the FAFSA forms to see how much student aid you qualify for before applying for a private loan. Most private lenders that originate student loans state that they 'fill the gap' for funding that federal student loans don't cover.

Federal Government Student Loans

Benefits of Federal Student Loans

• Repayment begins after graduation, you leave school or change your enrollment status
• Interest rates are fixed for the duration of the loan and vary on the loan type and date of the first disbursement.  As federal rates are reviewed and changed annually you will find the latest update on the Federal Student Aid website.  Perkins Loans have a fixed interest rate of 5% regardless of what year the loan is disbursed in.
• Federal student loans do not require a credit check.  In fact, a federal student loan can help you establish a good credit record if you make the payments on time.  The only exception for a credit check is if you are applying for a PLUS loan.
• If you are an undergraduate student and can prove financial need, you will likely qualify for a subsidized loan where the government pays your interest while you are in school.  Instead of the interest accruing and being capitalized while you are in school, the interest won't start to be charged to your account until after graduation.
• Cosigners are not required when applying for a federal government student loan
• Interest may be tax deductible (check with your accountant to find out if you qualify)
• Loan Consolidation -You can combine all of your federal education loans into one loan.  The interest rate is fixed for the life of the new consolidated loan and the interest is calculated on the weighted average of your existing loans
• Federal student loans offer forbearance or deferment options should you run into difficulty repaying your loans
• Offers several repayment plans including the income-driven repayment plan. The federal government offers 4 income-driven repayment plans with the most common one being the IBR (income-based repayment plan)You can pay out your full loan early without any penalties
• Loan forgiveness - if you work in public service, you may qualify for part or all of your loan to be forgiven

Types of Government Student Loans

• Direct Subsidized Loans - for undergraduates who need financial help
  • the college and university determines the amount you can borrow
  • U.S. Dept. of Education pays the interest while you are in school and for the first six months after you leave school
• Direct Unsubsidized Loan - available to undergraduate and graduate students whether or not they have financial requirements
  • the college and university determines the amount borrowed based on class load
  •  you are responsible for paying the interest during all periods
  • if you choose to postpone interest till you have completed your schooling, the interest will accrue and be added to the principal loan amount
• Direct PLUS Loan (Parent Loan for Undergraduate Students) -This is a federal loan that your parents can apply for to help with your college or university education. This loan becomes the parent's responsibility to repay and cannot be transferred to the student upon graduation even through consolidation of other student loans. If the student chooses to help repay the loan and misses a payment, this missed payment does NOT affect the student's credit, it negatively affects the parent's credit. If a parent chooses this option, their eligibility is based on their personal credit history. If they have poor credit they will not qualify for a Direct PLUS loan.
• Application Time Limits -
  • NOTE: The time limit for eligibility for the Direct Subsidized Loans is based on the length of your current program. For instance, if you are enrolled in a 4-year education degree, you are eligible for a direct subsidized loan up to six years. If you switch majors, and it has a different length of completion, your years of eligibility is carried over from your previous degree and applied to your new program.
  • There is no period of eligibility for Direct Unsubsidized and Direct PLUS loans.
• Perkins Loans - are low-interest federal student loans for undergraduate and graduate students who have a great financial need.
  • The school you are attending and the availability of funds determines how much you may be eligible for.  
  • Undergraduates may be eligible to receive up to $5,500 per year for a total of $27,500
  • Graduates and professional students by receive up to $8,000 per year for a total of $60,000
  • Interest rates are fixed at 5% for the duration of the loan
• Work-Study Programs  This Federal program helps students with financial needs by providing part-time jobs for undergraduate and undergraduate students.  The majority of jobs are in community service or related to the student's degree.
  • The work program is available to both part-time and full-time students who are in undergraduate, graduate or professional degrees.
  • Your school will determine your eligibility and find you a suitable job
  • You will earn minimum wage but you may earn more depending on the job and skill required.
  • Your school will consider your class schedule and determine how many hours you are able to work 
  • You can be paid directly or have the money applied to your tuition, and school-related charges.
• Scholarships for Military Families  There are many resources available to Military families.  Some of these are:
  • VA Education Benefits for veterans and their widows 
  • Army ROTC (Reserve Officers Training Corps) scholarships are offered at more than 1,000 schools
  • Air Force ROTC scholarships focus mainly on those enrolling in foreign language studies and technical degrees
  • Navy ROTC offers scholarships for 4-year degrees 
• Federal Pell Grant  Unlike the Direct Subsidized and Unsubsidized loans, Pell Grants does not need to be repaid.  They are awarded to undergraduates who prove extreme financial need.  
  • although maximum amounts change annually, the maximum for the 2018- 2018 year is set at $6,095
  • the amount you receive will be determined by your expected family contribution, cost of attendance, your student enrollment status and how long you plan to attend school for the year.
  • the amount you receive through a Pell Grant is not determined by the amount of any other student aid you may receive.
  • To be eligible every year, you must fill out the FAFSA form every year.
  • Once you have received a Pell Grant for 12 semesters or earned your degree, you are no longer eligible to receive another Pell Grant should you decide to go back to school.

If you are going to apply for Federal Student Aid, you must, first of all, meet the following criteria:

• You must be a U.S. citizen or an eligible noncitizen with a valid Social Security Number (SSN)
• Demonstrate financial need  
• Have a high school diploma or equivalent (GED) certificate
• Be enrolled and accepted into an eligible degree or certificate program at a qualified college or university
• maintain satisfactory academic grades in college or university
• if you are male and between the ages of 18 and 25, it is mandatory that you are registered with Selective Service
• Funds are used for tuition, fees, room and board, and other school charges. 
• Repayment commences 9 months after graduation, leave school or drop below half-time attendance.

Fees for Federal Subsidized and Unsubsidized Loans  - there are loan fees charged for  Direct Subsidized, Direct Unsubsidized and Direct PLUS loans. There are no loan fees for Perkins Loans.  The fees are a percentage of the total loan amount applied for each year and is deducted from each loan disbursement you receive while enrolled in school.  Typically, the loan fees for Direct Subsidized and Direct Unsubsidized are just over the 1.065 range.  Direct PLUS loans fees are usually around the 4.25% range.  It is important to remember that the fees are directly linked to the year of disbursement and are subject to change.

What are the loan limits for federal student loans? 

The school you are enrolled in determines the loan type and the loan amount you are eligible to borrow each year of attendance.  There are limits on how much you can borrow in subsidized and unsubsidized loans.  The following chart is a quick overview of loan limits.

Year - Loan Limit	Dependent Students	Independent Students
First Year - Undergraduate	$5,500 - ($3,500 maximum in subsidized loans)	$9,500 - ($3,500 maximum in subsidized loans)
Second Year - Undergraduate	$6,500 - ($4,500 maximum in subsidized loans)	$10,500 - ($4,500 maximum in subsidized loans)
Third Year + - Undergraduate	$7,500 - ($5,500 maximum in subsidized loans)	$12,500 - ($5,500 maximum in subsidized loans)
Graduate or Professional	Not applicable (Independent only)	$20,500 (unsubsidized only)
Subsidized and Unsubsidized Aggregate Loan Limits	$31,000 - ($23,000 maximum in subsidized loans)	Undergraduate - $57,500 ($23,000 maximum subsidized loans) Graduate /Professional - $138,500 ($65,500 maximum subsidized loans)

Once you reach the maximum limits you are no longer eligible to apply for additional funds.  If you are able to pay down some of your existing loans, you can then reapply for additional.

Graduate and professional students enrolled in certain health profession programs may receive extra Direct Unsubsidized loans that have higher limits than shown above.  You will need to discuss this with the Student Aid office at your school.

Subsidized and Unsubsidized Loans

Subsidized loans are available to undergraduate students who have financial need.  The U.S. government pays the interest on the loan while you are in school and for 6 months after you graduate.  They will also pay the interest if you run into financial difficulty and are unable to repay your loans for a period of time.

Unsubsidized loans are for undergraduate and graduate students even though they do not have financial difficulties.  You are responsible to pay the interest while you are in school.  You have the benefits of lower fixed interest, deferment, forbearance and repayment options.  If you choose to not pay interest while you are in school, the interest will accrue monthly and be capitalized when you graduate.

Debt Consolidation

You are finished school and have begun the process of paying back your federal student loans.  The federal government allows you to consolidate them all into one loan.  By consolidating your federal student loans, you will have more options for repayment and possibly forgiveness plans.  The following loans are eligible for consolidation:   Subsidized and Unsubsidized Federal Stafford Loans, Direct Subsidized and Unsubsidized Loans, Loans for Disadvantaged students.

Private Student Loans

So, you have used up all limits on your federal student loans and find that you are still short money.  What do you do and where do you go.  This is where private student loans help.  Private student loans are offered by banks, credit unions, and other lending institutions.  Unlike federal loans, you must meet the lending criteria before you are approved.  If you do not meet these requirements on your own, lenders offer you the ability to add a cosigner to help you get approved and have access to better terms and rates.  It is important to shop around and find the student loan that best suits your needs.

• Private Loans do not require financial aid forms and the process is usually quicker
• The student can apply for a higher loan amount based on their credit score
• There are usually fewer restrictions on what the loan can be used for
• If the applicant's credit does not meet the lender's criteria, a co-signer can be used
• Interest rates are usually higher than the Federally backed interest rates
• The terms and repayment are usually more flexible
• If a cosigner is used, the applicant has access to better rates and terms

Private loans will require that the borrower makes a minimum monthly interest payment while they are attending school. This allows the student to start building a strong credit history for future loan/mortgage applications. It also teaches healthy financial habits and responsibilities. Many private student loans will allow the students to defer interest payments til after school or graduation - whichever comes first.

Most private lenders require the following criteria before approving a loan.

• Credit score - you must show a strong credit score, usage and history.  If you have not had time to establish credit, you will be asked to add a cosigner who is creditworthy.
• Documentation - you will need to show your school's cost of attendance form 
• Must be 18 years of age or older
• Must be a U.S. citizen or Permanent Resident

Interest Rates

Private Student Loans offer both fixed and variable rates for the duration of the loan.  You will want to do a rate comparison to find the lowest rate you can get.  Private loans offer terms from 5 - 20 years.

Repayment Options

Each lender offers different repayment options.  Some offer interest only while you are in school,  Most private lenders require full payments (interest and principal) within 30 days of disbursement.

Refinance

The federal government allows you to consolidate your federal loans into one loan and one payment.  Loan consolidation takes the weighted average of the interest on your existing individual loans to compute what the interest will be on your consolidated loan.   You can only consolidate your federal loans and cannot include any of your private student loans.  Private lenders will allow you to refinance all of your existing student loans (federal and private) into a new loan.  You will qualify for the terms and rates based on your credit and ability to repay the loan.  You can choose variable or fixed rates and up to 20 years for repayment.   If you require a cosigner, most private lenders will allow a cosigner release after 12 - 24 months of consecutive, on time, monthly payments.  Note:  if you choose to refinance your federal student loans, you will lose all benefits associated with the loan such as - income-based payments, deferment, forbearance and possibly loan forgiveness.  Some lenders will allow a couple to refinance both of their student loans into one new loan and will take the partner with the better score and stronger work history to qualify as the main borrower on the loan.

Elephant in the Room

The Huffington Post in the August 2016 stated that the education bubble of degrees vs. debt is becoming the 'elephant in the room'. Historically, individuals who earn a degree get better, more secure and higher paying jobs once they enter the workforce. We as a country have embraced this philosophy - higher education, better jobs, better quality of life, better for the next generation, better for our country. We began to judge public education institutions that taught K-12 based on their ability to qualify their students for entrance into grade 'A' universities and colleges. But, these 'A' universities and colleges come with a higher tuition and overall cost. It has become a status symbol as to which post-secondary college/ university you attended.

Proper Financial Backing

Where most students run into problems is trying to attend these schools without proper financial backing. They apply for student loans for the entire duration of attendance, accumulating more debt than they can reasonably pay off within a 10 year period. Add to that marriage, house, car, children with a salary that does not increase with the added financial load and it spells disaster. If a student ends up dropping out of college/university for whatever reason they still are obligated to repay their student loans. Dropping out or being unable to complete their degree means accepting a lower paying job which has the domino effect. Less money to live on = less money to repay their student loans.

Right Choice

Students entering post-secondary institutions need to be confident in their choices. Often the 'dream' needs to come with a dose of personal reality. Is this really the degree I want. Will this degree insure me a job within the industry I have chosen? How much debt will I incur and based on the entry salary for my degree how long will it take for me to pay it off? What are the best student loans and repayment schedules? Is there any way I can work part-time during the school year and summers. How can I minimize my debt loan to launch my future? First of all, you have to pick the right student loan for yourself. Regardless of the political mindset of the country, a college, university education is a long-term investment for yourself and your family. If you plan carefully, you will find the right school and funding that works best for you in the short and long term.

Steps to Choosing a College and Student Loan:

1) If you are finishing high school or looking for a new career path, what are your interests? What do you like to do? This is a good starting point. Start with what you like, but be open to new opportunities and subjects of interest. If you start with a direction and courses that apply to several degrees, you can change your mind and courses needed to end up where you want to go? Don't know? Same thing - choose courses of interest that apply to different degrees as you will not need to choose a major until your third year of college /university. Get started and the rest will fall into place.

Career Choices

Choosing a career based on salary alone, will not bring you fulfillment. Find a career that offers growth and innovation for career movement. A great resource for deciding on a career choice is to go to the Federal Student Aid site and research their 'Prepare for College' tab. This site offers a wealth of information on all career paths. It is important to look at what careers offer for longevity. Advancements in technology will change the face of careers. Be sure to choose one that works alongside IT. If you are a woman and are hoping to stay home with your children look at careers that would offer you this choice. Teachers, self-employment, bookkeeping, etc. are all fields that would lend themselves to spending maximum time with your children.

Your Future

Finding a career that is sustainable or will lead to a new direction in the future is extremely important. In this era of never-ending technology advancements, it is extremely important to choose a career that is forward-looking. Will what I want to do be sustainable in the next 10, 20, 30 years. What will my career look like, what will my pay scale be from the commencement of my career to retirement? Can my degree or parts of it be transferable to a new field of work? Once you have an idea as to the direction you want to go, the next step is to pick a college /university.

Staying Local

There are many benefits to attending a local college or university. The biggest reason is cost and convenience. If you and/or your parents are signing for a loan for your education, the cost of borrowing is much less as you will probably only need to borrow tuition and books. Living at home reduces living costs, you have the support of family and friends. Once you graduate, your student loans will be much minimal and easier to repay.

Leaving your State

You may need to attend a university or college in another city or state. Use a spreadsheet to figure out your costs - tuition, books, fees, room & board, transportation, and miscellaneous items. Look at the cost for the duration of schooling to obtain your degree. The thought of attending school away from home sounds appealing, but many a graduate laments the fact that if they had stayed home, their cost of repayment would have been less than half. Choosing a college or university is definitely a decision that you will want your parents' support. Federal Student Loans do not need a co-signer for most loans unless your credit history is poor.

Your Credit Score

You can find your score before you start by using an online Credit Bureau such as Equifax, Transunion, Experian. You are entitled to a free credit report every twelve months with all three credit bureaus. If you are a first-year student, it is a wise decision to firstly apply for a Federally Backed Student Loan. If you require more funds to complete your school year, then apply to banks and private lenders.

Apply June/July

If you are attending university or college in the fall, June and July are the time to apply for your student loans. Universities and colleges have deadlines for which tuition and room and board must be paid or they will cancel your application. Most schools look for room and board August 1 and tuition by the first to mid-September. As an upcoming student, you want to be ahead of the payment schedule and have your financing in place before payment deadlines.

Other ways to help Pay for my Education

Scholarships

The government, colleges, companies and various other donors provide money to help students cover the cost of their tuition and are usually 'merit-based.' Scholarships do not need to be repaid after you stop attending school. Scholarships vary in criteria and amount. Some may cover the entirety of your tuition, while others may only pay a portion. Every scholarship has its own criteria and if you are looking to apply for a scholarship you will need to look at each individual scholarship that applies to your program. The U.S. Department of Education recommends finding scholarships at the U.S. Department of Labor's scholarship search tool. Also note, that scholarships do affect your other student aid. All student aid added together cannot equal more than the cost of attendance at your specific college. Once you are awarded a scholarship, be sure to let your financial aid officer know, so that the amount can be subtracted from your attendance cost. 

Grants

Grants are considered 'free' money - financial aid that does not have to be repaid. Grants are need-based. They can come from the federal government, your state government, your college or a private or non-profit organization. If you are interested in a federal grant, you must submit a free application for Federal Student Aid (FAFSA) every year in order to stay eligible.

Conclusion

Having a college and/or university education should be everyone's priority. The opportunities and personal growth that earning a degree offset the cost. It is important, however, to do your research, enroll in a program that interests you and is at a college that suits your lifestyle. Earning a degree and being practical teaches financial responsibility.

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