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Preparing to Pay Before—and After—College

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As a senior in high school who was considering preparations for college, I can remember thinking, “My parents will take care of it!” Then, a decade later, as a financial aid director, I realized that a sizeable amount of preparation and research needs to be done by parents and students alike in order to properly plan for their child’s financial funding—and keeping future debt under control. Student financial aid, loans, grants, FAFSA—these things are not as easy as my eighteen-year-old self thought they were. I decided, when I was in the position to help with Financial Aid options, to take the opportunity and share this knowledge with parents and students. 

For example, students can start applying for scholarships as early as their freshman year in high school. There are many organizations and websites that offer scholarships to the pro-active student. My favorite is fastweb.com, which allows you to search in a centralized location for specific scholarships based on deadline, effort level and interests—eliminating the potential for confusion that comes with simply typing “scholarships” into a Google search. However, that is not the only option for scholarships. You should explore what your local organizations and preferred colleges provide as well. Scholarships are in high demand and low supply, so I encourage you to begin searching early and apply often for a variety of scholarships and grants. This may enable the gathering of a nice sum in “free money” towards education expenses prior to starting college.

The FAFSA (Free Application for Federal Student Aid) is a substantial part of the student aid process, and is integral in applying for certain scholarships and student loans. There are deadlines for some scholarships, so keep this in mind and complete the applications sooner rather than later. Student loans may not be your top preference as a source of financial aid, but there are several factors to consider when assessing whether this option works for you and/or your student:  foremost, it helps in building credit for young adults before they find themselves trying to get a job, rent an apartment, and buying their first house or car. Also, when it comes to managing debt, one important thing to consider is that federal loans allow for forbearance and public service debt forgiveness (given the line of career), while private loans do not offer these repayment possibilities. Private loans are an option that are not based on the FASFA, but on the assets and credit scores of the individual applying.

What are some other options, should you decide that a student loan is not right for you or you do not qualify? How will you pay for your student to go to a higher education institution? There are several alternatives to consider including savings plans, private loans, and let’s not forget scholarships. If you have extra funds in the bank and a student in your life that will be headed to college, you might consider starting a 529 Plan. You can do this at any time for children, grandchildren, or yourself. College savings via a 529 Plan is a way to put "lazy money" to work. Speaking to an advisor about getting those funds out of your checking or savings account and invested into education via a 529 Plan can have many advantages.
 
Don’t neglect yourself—if you want to go back to school, a 529 Plan may be an option for you as well. The article "3 Graduate School Savings Tips for Full-Time Employees" may be a helpful read if you are interested in returning to school.
 
Private loans are another option that would not involve the FAFSA and student eligibility. Home Equity Line Of Credit (“HELOC”) is an example of a private loan that can be used to fund college. Both student and HELOC loans allow for tax deductions however, a HELOC is based on the equity in your home. The article "Pros and Cons of Paying for College with Home Equity" dives deeper into assessing whether this might be a good option for you. 
 
With so many decisions to be made, and education being a fundamental part of life, it is important to ask for assistance and assess what is best for you. If my parents and I had known all the options that were available to us, it would have helped build my credit and independence, and for my parents to save time and money.

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