Let’s be honest, when it comes to personal finance…you either love it or hate it. But…
With college getting more expensive, many families are looking for alternative ways to finance their child’s education. With that said, here are some options to seek when you are seeking funding for your or your child’s college education:
1) Federal Aid (FAFSA): This is the best and most convenient way to get money for a college education. Federal aid comes in the form of grants and low interest loans. If your family’s income qualifies, you can get grants from the federal government and never have to worry about paying it back. However, if you do not qualify for grants, there are always low interest loans from the federal government. Federal government comes in two forms: subsidized loans and unsubsidized loans. Subsidized loans are ideal because the loans do not accrue interest until months after your graduation—because the loan is payments are subsidized by the government. Unsubsidized loans are another option. With unsubsidized loans, interest begins accruing when you take out the loan. However, like subsidized loans, you do not need to pay back the loan until months after graduation.
2) 401k Loans: 401k loans are a great option if you have a good amount vested in them. 401k Loans is essentially taking out a loan against yourself. This is a great option for non-traditional students with some working experience. The only caveat is that you still have be employed with the company that is funding your 401k.
3) Private student loans: Private student loans are another option and are funded by banks. Private student loans will often have a payment deferment option so you will not have to pay until you have graduated. The rate of student loans are often based on the London Interbank Offer Rate (LIBOR) rate plus a margin the bank charges. Private student loans are often more expensive than federal loans but cheaper than unsecuritized personal loans. It is good to shop around for private student loans as they can vary quite a bit between the different banks.
4) Social lending: A new option that has propped up in recent years is social lending clubs (such as LendingClub.com and Prosper.com). These platforms are usually reserved for unsecured personal loans but they can be a good option as a secondary means to financing a college education. Many of these clubs have limits on how much you can borrow so you will not be able to finance all four years through social lending. It can be good option if you are borrowing to pay for books and other miscellaneous student expenses. Social lenders do not have a payment deferral option so you will have to pay the loan back just like other personal loans.
5) Scholarships: There are a full range of scholarships from special interest groups available to students. Many of these scholarships may be small (ranging from $500-$1000) but it can add up if you are awarded a few of these. If you want to look for scholarships, consider going to your school counselor or going to sites such as Fastweb.com .
6) If you are a parent, consider starting a 529 plan for your children. A 529 plan lets you pre-pay for college or invest your money in a variety of markets and funds for long-term returns. 529 plans are state-run and each state picks an investment firm to manage its 529 fund. You will need to find out more from your state if you want to invest in a 529 plan. To find out the difference between pre-paid and investment-driven 529 plans, please visit the SEC site.
7) Join the military. The military and the VA has been paying for college of veterans and military service members for quite awhile now. So if you want to serve your country and get college paid for as well, consider joining the military. If you want to attend college while in the military, you can use the Armed Forces Tuition Assistance program. If you want to attend college as a veteran, you can use the GI Bill. Either way, you will have the cost of attending college fully paid for (this can include books, living expenses, and housing).
Those are the top seven ways to pay for college. Some of these ways require you to take out a loan while others options offers you a way to pay for college without loans. It is important to find out what is best for you and your family when deciding how to pay for college. College is a big commitment so you will need to plan ahead and plan carefully.
Additional resources To Find Out About Financial Aid For College: