Even more scary than your child leaving the nest may just be paying for their new nest! If your son or daughter will be attending college in the near future, you may already be experiencing some anxiety about how to pay for college tuition. Fortunately, there are several options you can look into for financial assistance.
These are federal student loans that can be either subsidized or unsubsidized. Subsidized loans are available for undergraduate students who demonstrate financial need. With unsubsidized loans, the borrower is not required to demonstrate financial need. The terms are different for both so it’s important to look at each closely. Plus, Stafford Loans are typically offered at lower interest rates than private loans.
Perkins Loans are administered by the school and are low-interest federal loans for students who demonstrate a financial need.
These are federal student loans that can be used by parents of dependent undergraduate students. They are not based on financial need and the borrower must be in good credit standing.
Direct Consolidation Loan
This type of loan enables you to combine multiple pre-existing federal education loans into one new loan at a fixed interest rate. This creates one monthly payment instead of several payments.
Private and State Loans
Private and state loans are not processed by the federal government and would be a possible alternative if the borrower doesn’t qualify for federal aid. Interest rates and terms would vary.
Home Equity Loan
After taking advantage of federal student loans, you may consider taking out a home equity loan to cover any additional education costs. With today’s low interest rates, it may make wise financial sense to use a home equity loan and in most cases the mortgage interest would be tax deductible.*
Borrowing from Retirement
Borrowing money from your retirement savings is not
recommended as an option for your child’s education costs. As wonderful as it is to provide for your child, college funding is not a necessity; saving for retirement is. With your encouragement, your kids can apply for scholarships, work, and choose an affordable school. In the meantime, you can continue to save for your future.
For comprehensive information on federal student aid, click here
to visit the Federal Student Aid government website.
Information gathered from http://www.asa.org/default.aspx
* The above is not intended to be tax advice, was not written by a tax professional and is informational only. Please consult a tax advisor for your specific situation.