College Education Concerns in the 21st Century
(c) M. Ryder
How to Become a Loan Ranger: Saddle up: It takes some serious tracking to hunt down the cheapest loans. And parents and students need to take different trails
The credit crunch and debacle on
But no matter what happens in
One of the most surprising results of the turmoil in the lending markets is how students' loan options have diverged from parents'.
Here are the keys both should bear in mind:
Deals for students.
Students should start by filling out the FAFSA form, the Free Application for Federal Student Aid.
All full-time students who complete a FAFSA and a federal loan agreement provided by their school's financial aid office can borrow at least
Low-income students generally qualify for better deals.
Some will receive federal Perkins loans, which charge no interest while students are in school and 5 percent after they leave. Most needy students will receive "subsidized" Stafford loans, which for the academic year starting this September will charge no interest while students are in school and 5.6 percent after they leave.
Need more? Uh-oh! Dropping out is usually far more expensive than sticking it out and graduating to qualify for better jobs, so it can pay to borrow a little extra to make it to the end. But students who need more than the government will lend have few good choices, says
Charities and colleges.
A few charities, such as
Banks and other lenders have gotten so picky recently that they've been making private (or "signature") education loans, often at high variable rates, and only to U.S. citizens with good credit scores. That means most students need at least one employed cosigner to promise to repay their private loans. But borrowers like
Options for parents.
Parents have to do more legwork, as
Federal loans are no bargain.
The federal government offers parents large and comparatively expensive loans. The federally backed parent PLUS loan can cover the student's entire cost of college (less other financial aid). But PLUS loans require a credit check and can cost as much as 8.5 percent a year plus a fee of 4 percent of the loan amount, for a total annual percentage rate of as much as 9.4 percent. Those who borrow directly from the federal government and make automatic electronic payments are charged just 7.65 percent in interest. (After fees, the APR totals 8.55 percent.)
Nonprofits and colleges.
Banks and private lenders.
Many parents are enticed by sub-4 percent private loan interest rates advertised by banks and firms such as
Luckily, several Web tools have emerged to help parents and students find and compare loans. Ranzetta has rated the most popular private loans based on their interest rates and consumer-friendly terms at studentlendinganalytics.com, and SimpleTuition.com lets shoppers compare interest rates offered by several lenders.
Home equity loans.
Housing market woes have given parents with good credit and equity a chance to take cash out of their homes at near-record-low rates. Krist realized he couldn't beat a home equity line of credit for a floating rate that started out at about 4 percent. And Krist says he doesn't mind taking on debt for his daughter. After all, his parents borrowed so that he, too, could graduate debt free.
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- Unified Admissions, Affordable Loans and 'Gap Years' -- Might Help American Colleges
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- Students are More than SAT Scores and Numbers in College Admissions Process
- Dreaded Financial Aid Form will be Easier to Fill Out Next Year
- Casting the Widest Possible Net: College Tuition Assistance & Financial Aid
- Serious Tracking to Hunt Down Cheapest Student Loans
- Calculating the Hidden Costs of College
- Regional Agreements allow Hefty Discount for Students from Nearby States
- The Real Secret of College Admissions
- Healthcare Giving Students Opportunity to Pay their Way through College
- Students & Professors use Twitter to Communicate Inside & Outside the Classroom
- Budget Cuts Hit Nation's Public Colleges Hard, Even as Demand for Well-educated Workforce Soars
- Women's Colleges have had to Broaden their Appeal and Support
- Best Tech for the Collegebound
(c) 2009 U.S. News & World Report