Maximize Your Education Dollar

The cost of higher education increases every year. With an increase in tuition and fees comes the need more and more financial assistance. Students and parents should understand how to maximize their education financing options. This article will discuss the steps that should be taken and the financing options that are available.

To aid you in the process of applying for financial aid here are en things that you and your family should consider:

1. Build a financial plan. Understand how much money you will be spending for your education. Do you have money set aside to assist in paying for your education? Can you work while you are in school? Can your parents assist with any of the costs of your education? Are there any scholarships or grants that you might apply for to reduce the cost of your education? Take the time to map out your future to see how much debt you will be taking on. Once you have done this you will be better equipped to make solid financial/educational decisions.

2. Complete the FAFSA (Free Application for Federal Student Aid) form. Regardless of your financial situation you should complete the FAFSA. The FAFSA opens the door to the financial aid process. This application will help determine if your family is eligible for Stafford loans, Graduate PLUS loans, PLUS loans, Pell Grants, Perkins Loans, and other sources of federal funding/financing. For federal Stafford and PLUS loan the interest rate can vary from about 4 percent to 9 percent. Perkins loans have a fixed interest rate of 5 percent.

3. Find out what loans/grants you have been awarded. Once you have completed the FAFSA, you should receive a SAR (Student Aid Report) which outlines the loans and grants you have been awarded.

4. Do not borrow more than you absolutely need. Always keep in mind that most of the money you are offered is not free. You will be required to pay it back when you graduate. Look at alternatives to student loans. For example, see where you can cut expenses in your budget or you may want to work off campus during breaks or summer vacations. Do you have family that is willing to contribute to your educational expenses? Answering these questions will bring you closer to understanding your financial commitment.

5. Find free money! Make sure that you have exhausted all scholarship/grant opportunities before you apply for Stafford, PLUS or Perkins loans. Apply for any scholarship that may pertain to you. This may be hard work now, but you will thank yourself once you have graduated. If necessary you may want to appeal the financial aid package from the school of your choice. They may be able offer you more money. In this case, the squeaky wheel gets the grease.

6. Move quickly to complete your loan application. Once you have determined your financial need apply for a loan immediately. It may take up to two months for approval of the loan. Accept all federal loans before you consider accepting any private loans. Federal loans have a lower interest rate and generally have better terms than private loans. The lower your interest rate the less money you will have to pay when you graduate.

7. Understand the terms of your loan. Most lenders will provide you with the information necessary to grasp the repayment terms, make sure that you understand these terms. Ask questions if you do not understand. Most importantly, the student should understand that once they accept the loan funds they have accepted the repayment terms of the loan.

8. Fill in the gaps. Not everyone’s financial needs are met by federal student aid, scholarships and grants. Consumer private loans should be seen as a last resort for college funding. The interest rates can be as high at 16.0 percent and the repayment terms tend to be less forgiving than any federal loans.

9. Understand your repayment terms. As you near the end of your college career make sure that you understand the repayment options available to you. If you are struggling to repay your loans there are options available deferment and forbearance allow you to forgo payments for up to one year at a time. You will also have different repayment options available to you that allow you to make a smaller monthly payment for the first few years of repayment. These programs vary from company to company. Be sure to ask your lender about these repayment options.

10. Consolidate your loans. Combining all of your student loans into one monthly payment can save you money. You are able to extend your repayment period for the loan, thus lowering your monthly payment by as much as 60 percent. By consolidating, you are able to fix the interest rate of your previously variable interest rate loans. Consolidation also helps you to improve your credit score. Furthermore there are no fees for consolidation. It is also recommended that you lock into your interest rate during your grace period. This will lower the interest rate of your consolidation loan by .6 percent.

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