Yes, it has come to be that time. On the list of things to do is a bit of financial planning on that bridge that exists in your child’s college tuition between the family savings and his or her scholarships and or grants, with some needed student loans. Yes, student loans are expensive, and rates are increasingly on the rise, but what other options exist? Many students and families have come together to rally for lower rates and tuition free public higher education facilities, but in the meantime, more and more students are having the need to turn to private loans where the average rate is now 7.81% for a variable and a whopping 9.66% for fixed. This puts a humongous damper on college planning and leaves about 60% of graduates owing an average of $28,400 per borrower, according to LendEDU, a major contributor to the loans industry. Altogether, total student loan debt in the U.S. tops $1.4 trillion and includes more than $165 billion of private student loan debt at the aforementioned rates. It has now become the second-largest expense an individual is likely to occur in his or her lifetime preceded only by buying a home.
Even federal loans are on the rise. New loans being disbursed for the 2017/2018 calendar year will increase to 4.45% from last year’s rate of 3.76%. However, students are being put in tough spots. With tuition costs continuing to increase, these federal loans aren’t enough to cover a college education, and families are being forced to take private student loans at the alarmingly high rates. While most students and families would like to rely solely on the more affordable choice being federal student loans, more than 1.4 million students a year will use private loans.
So, How Does One go About Applying for These Student Loans?
The first step in financial planning for all students would be to fill out a Free Application for Federal Student Aid, better known as a FAFSA application, preferably in their senior year of high school. Upon looking at the provided information, it will be determined if you qualify for free grants, and everyone is offered federal and private loans. All student loan money and grants go directly to the enrolled school of choice, with refunds being disbursed after all expenses are paid, including tuition, housing, meal plans, and textbooks, if all applicable. There is no college receipt that needs to be shown to get approval for the loan money. All student loans, both private and federal, are certified by the school itself. The loan company will verify enrollment, tuition, and need with the school directly. Although it may seem overwhelming at first glance, it is a well-organized system if taking this route for college planning. The important part to remember with the loans and grants is that they must be reapplied for annually, beginning in February or March of the preceding school year. It is recommended that time is spent gathering as many scholarships and grants as possible before turning to student loans, as they become a setback for the student upon graduation, and immediately start them on their road to success, in debt. Not a great way to begin life on your own after the average 4-8 years of college!
While the top concern most students faced about college planning was once getting into their first choice school, it has now shifted to the amount of debt they will take on to pay for a degree, and how they will do it. College planning has taken on a new meaning, and we can all just hope that one day soon, we will follow in other country’s footprints and offer free higher education to everyone who is interested.