How to Pay for College

The word college usually conjures up images of learning and higher education. It also conjures up horrible sights of the immense cost of college. Between the cost of tuition, books, classes, lab fees and boarding a college education can get quite expensive. Naturally the question arises how to pay for this? The first step is to fill out the Free Application for Federal Student Aid (FASFA) this application will allow the government to assess how much financial aid you need and allows access to federal grants that can lessen the shock of the cost of college. While the federal grants will never be able to cover the full cost of college there are other ways to pay for the remaining costs.

1. College Scholarships
One of the most convenient ways to pay for college is to apply for college scholarships. With millions of dollars available to students all you have to do is work for it! Most scholarships require you to write an essay on nearly anything or to do something that stands you out among the crowd and all of them require an application. But beware with anything involving money there are scams and scholarships are not immune. Most scams are obvious are obvious for example: if a scholarship application asks for your Social Security Number or for any unneeded information that they would have to clear with your school it is fake. You should always check the creditability of a scholarship especially if it asks for a school transcript. A good way to avoid the on-line scams is to use trusted websites like www.collegeboard.com and www.fastweb.com.

2. Loans
Loans are something that most people use to pay for college because it is a second convenient way to pay for college. There are four types of loans: a student loan, a parent loan, a private student loan and a consolidation loan. The federal government controls the maximum interest rates and fees for federally insured loans but lenders can charge lower rates to lure prospective buyers in. An example of a standard student loan is the Stafford loan or the Perkins loan. These loans do no require require credit checks and usually have a very low interest rates. The Stafford loan is either a subsidized loan in which the government pays the interest rate while you go to school or an unsubsidized loan in which you pay the interest rates. They have a fixed interest rate of 6.8% and a loan fee of 4% but will be continually lowered until it is phased out by 2010. You can apply for a Stafford loan through the FASFA all students can apply for an unsubsidized loan regardless of financial need. The Perkins loan is awarded to students in exceptional need. The school acts as the lender and there are no default fees. It is a subsidized loan with a 5% interest rate with a ten year repayment period. The amount that can be borrowed through the Perkins loan varies based upon the school’s financial office. A parents loan allows parents to take out loans to aid their children’s financial aid package. This loan has a fixed interest rate of 8.5% and has loans fees of 4%. It is an unsubsidized loan and has the same repayment period as the Stafford loan. A private student loan is offered by private lenders and requires no federal forms but it does use your credit score. Private student loans cost more than a federal loan because of the variable interest rates and higher interest rates based upon your credit score. You should always exercise your access to federal loans and grants before going to the private loans. The consolidation loan is not really a loan but a way to combine other loans into a single loan offered by a single lender. The interest rate of a consolidation loan is the average of the loans being used in the consolidation loan but the interest rate cannot rise past 8.25%. Both parents and students can use a consolidation loan and there is no fee to do so.

3. Advanced Testing
There are tests that can save you money by proving that you have more knowledge than the class can provide you with. If you have taken advanced placement classes in high school you will already know about CLEP tests that can award you college credits upon successful completion. The CLEP tests usually costs around 65 dollars, compare that to thousands of dollars associated with a class and it seems to be an acceptable cost. As an added bonus to military members these tests are available at no cost through DANTES.

4. Out Of Pocket
We now come to the option you should dread: paying for college out of your own wallet. Most people do not posses the financial means to pursue this option and it should be the last option you should use. If someone does pursue this option they either pay out of pocket or through a high interest credit card which are both terrible options. Obviously this is the most expensive option because there is little to defer the cost.

College can be a daunting place financially but when weighed against the opportunity it can provide it could be a valuable endeavor.