It’s high season for prospective college students, as they and their families compare colleges and decide how to finance what is often one of life’s biggest expenses. After tapping savings and 529 plans (assuming parents or guardians have been contributing over the years) there’s almost always a shortage. And while some parents feel obliged to do all the financial heavy-lifting (with some foolishly tapping into their 401[k]’s), let’s remember that there are many more safe and affordable ways to fill the tuition gap. Here are seven ways to ease the financial burden of college, in hierarchical order.
Millions of dollars worth of scholarships and grants are available each year to college-bound students. The key to winning them—aside from meeting the qualifications—is applying early and often. As Mark Kantrowitz, financial aid expert and author of “Secrets to Winning a Scholarship,” writes, winning a scholarship is kind of a game of numbers. “It’s based on both skill and luck,” he writes in his book. “Applying to more scholarship programs gives you more opportunities to win a scholarship.” Databases at Fastweb.com, Scholarships.com and SallieMae.com are great places to begin your search for applications.
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Additionally, parents should inquire about education awards at their respective companies. Some examples of corporate scholarships:
- Walmart and Sam’s Club offers several scholarships each year worth $3,000 to $13,000 each. A student must be the child of Walmart employee and prove financial need.
- Alcoa’s Sons and Daughters Scholarship Program reserves free aid to graduating high school seniors who are children of Alcoa employees. The rewards are in the amount of $1,500 annually, renewable for up to three years.
- The Verizon Foundation has scholarships reserved for children of employees, awards as high as $20,000.
Earn up to a year’s worth of college credits with Advanced Placement credits earned in high school. Many colleges and universities accept qualifying AP credits, which students can earn after taking an advance placement course and exam in grades 11 and 12. Each exam costs $87, but if you score high enough, you could be exempt from an entire class—a savings of hundreds or thousands of dollars, depending on the college.
Student loans (private and public) are the most significant type of financial aid for college students. As universities increase tuition faster than the rate of inflation, few students and their families can actually afford to pay for education costs out of pocket or with scholarships and grants. In fact, the most recent data from the Institute for College Access Success shows that approximately two-thirds of graduates from four-year schools in 2008 owned an average $23,200. That’s close to double the debt of the class of 1996.
Apply for federal loans first. They offer low interest rates and flexible repayment terms. When scholarships, grants, federal loans and savings fail to cover the cost of education, some students and their families turn to private student loans to help cover the difference.
Unlike government loans, private student loans, which are offered through private lenders and financial institutions, are not subsidized and your eligibility and interest rate is often dependent on your credit rating. The interest rate is typically a variable rate, which resets quarterly, while federal student loan rates are fixed.
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Image: Jeff Ozvold, via Flickr