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Pulling Together a College Funding Plan

Student Finances Oct 3 Pulling Together a College Funding Plan

Heading off to college means making a lot of decisions. The first big decision: which school to attend. If you’ve knocked that off your list, congrats! But you’re not in the clear yet. The next big step is pulling together your funding plan, and that means exploring financing options and figuring out the best combination for your situation.

We all know that college costs are high, and not many students and families can afford to cover all the associated expenses without a little help. After first exhausting any funds that won’t need to be repaid – such as from college savings plans, scholarships or grants – turn to college financial aid offices and the federal government for essential resources in planning for this investment in your future.

Start with FAFSA

Your first step should be to fill out a Free Application for Federal Student Aid (FAFSA), plugging in student and family demographic and financial information. You can include up to 10 colleges to receive your information. In return, you’ll learn how much financial aid you’re qualified to receive at each institution, whether in the form of grants, work-study funds or loans.

Be sure to complete the application as early as possible, as some funds are awarded on a first-come, first-served basis. If you don’t have all your financial data, you may enter estimates so long as you provide final, accurate information once available. After an application is submitted, keep all financial documentation in a safe place for quick reference; you may need it for any private student loan applications.

Identify funding gaps

Once you hear back from the FAFSA, you’ll be able to see how much of your college costs are covered. First, take advantage of any options that don’t need to be repaid with interest, such as grants or work-study funds. Then, consider federal student loan offers.

Direct federal student loans can offer benefits that may be hard to come by with private lenders. Some loans for students demonstrating financial need may be subsidized, meaning the government picks up the interest during the college years, any grace periods and deferment periods. With an unsubsidized loan, students are responsible for paying all accrued interest (note that if your parents are helping out, unsubsidized federal loans are also available to them). The feds also offer consolidation loans, which allow students to combine all their federal loans into one for simpler management.

Bridge your gaps

If your patchwork of funding still isn’t enough to cover all your anticipated expenses, turn to a trusted and responsible financial partner to explore getting a student loan. Unlike federal aid awarded based on need, private lenders will offer terms and options based on your credit history, or your ability and willingness to repay.

Since undergrads typically don’t have a lengthy credit history or a steady source of income, you might need to secure a co-signer on your loan. You and the co-signer would be responsible for repayment of the loan and any interest accrued. Having a co-signer can help speed up the review process and improve your chances of approval, and sometimes you can release your co-signer after graduation if certain conditions are met.

Many lenders offer an electronic loan application process, and you can complete the required forms at your convenience. Turn to your file of financial documentation used for FAFSA to help complete the application. The timeframe from submitting your information to learning whether you’re approved, and for how much, will vary depending on the lender you choose. To ensure your finances are in order before tuition is due, start the process as early as possible.

If you’re approved for a loan, the final steps are to determine how much you’ll accept and how it will be repaid. Remember, only borrow what you need because you will be paying all this money back with interest. If you’ll be working during college, consider making small payments while still in school to get in the habit, such as through fixed or interest repayment options. You can also defer payments until after graduation for the most flexibility, or take advantage of no prepayment penalties to pay down loans as much or as quickly as possible.

Borrow wisely

A debt-free college education may be out of reach, but smart financing isn’t. Take some time to review and understand your options to make the most of your resources now and well into the future. And remember, consider the anticipated monthly payments on any student loan you are exploring and your expected future earnings before taking on any loan.


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