While the cost of college is seemingly astronomical, there are a number of avenues you can explore to secure funding for college that makes the cost manageable. When you’re considering your options for securing finances for college, be sure to explore all of your options, including traditional, federal, and private student loans, as well as and nontraditional financing options.
Traditional Student Loans
One loan option with which you may be familiar is a traditional student loan. This financing option allows you to borrow the necessary money for college for the number of years you attend and typically requires no payments until 6 months after you graduate. The terms of this agreement often include a maximum amount for each individual year, a total maximum amount, flexible repayment terms, availability for undergraduate and graduate students, and tax deductible interest. You can generally finance these options through a bank or credit union or even your school’s financing program.
Federal Loans
Students often fail to fully explore the federal loan options. There are a number of different federal funding programs that offer eligible students monies based on family finances. Some of the most common programs include Federal Stafford, Parent Plus, and Perkins Loans.
- Stafford Loans:
If you qualify for a subsidized Stafford Loan, the government will foot the interest bill on your amount until after you graduate. If you don’t qualify for a subsidized Stafford Loan, you’ll likely still qualify for an unsubsidized one, for which you will have to pay the interest. The maximum amount correlates to your standing in college and is capped at $31,000 total.
- Parent PLUS Loan:
This option is actually offered by the federal government through colleges. By choosing this route, your parents will pay interest while you are in school. The total amount is based on the difference between your cost of attendance at your chosen college compared to the amount of financial assistance you’ve been offered.
- Perkins Loan:
The Perkins Loan is designed to help students with severe financial need. The maximum amount offered is $4,000 per year and a total of $20,000 for each student.
Private Student Loans
You may want to consider the options of securing a loan through a private institution. Many banks and private lenders offer students private options with varying interest rates. However, these generally carry with them additional costs, such as origination fees. Most also require a cosigner to guarantee repayment. When you're looking into private loans, you will likely come across both unsecured college loans and secured college loans that require collateral. You should look at this type only after you’ve explored all other options.
Nontraditional Loan Options
Finally, you may consider working with your parents or family to secure one of several nontraditional financing options. Some of these include mortgage or home equity loans financed through your parents, intra-family loans offered by a family member, a life insurance policy with cash value, or a 401k loan secured through your parents’ retirement plan. Depending on your family’s financial circumstances, these options may be more feasible than more traditional financing options.
Before you rule out college because of the cost, be sure to consider all of your financial possibilities. You will likely qualify for more financial aid than you realize.
