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As we find ourselves on the downward slope of summertime, many of us continue on with relatively no change in schedule or duties. We’ve checked off the boxes of family or solo vacation, sunburn, yard work, and complaining about the weather (I’m in Texas and it’s very close to the Sun). But for many people, there is the prospect of starting a new semester of higher education in the fall. Whether you’re an incoming freshman or a returning student, you will need to pay for not only tuition, but the various fees, books, and materials for your college or trade school classes.

How do you pay for all this? Well, short of winning the lottery or finding pirate treasure, we normal people have to pay for education expenses. According to CollegeBoard.org, the cost of higher education has been rising year after year, and can vary in percentage increase according to private versus public institution, and geographic location. Knowing what type of loan you’ll need to pay for education, applying for the loan or loans, and then learning about repayment are all “must know” topics.

Grants and Scholarships
Several types of loans exist, but before we touch on the various types of loans, let’s talk about grants and scholarships. A grant is a form of financial aid that is awarded based on financial need and does not need to be repaid. The largest grant program is known as the Pell Grant, and is awarded to undergraduate students by the U.S. Department of Education. For families or students with significant financial need, the Federal Supplemental Educational Opportunity Grant can be an option. Also, individual states and institutions offer grants of varying dollar amounts. Scholarships are typically awarded for a student’s prowess in the classroom and/or in the athletic realm, and can be awarded by educational, public, or private entities. To learn about grant availability and qualification, a student can fill out the Free Application for Federal Student Aid, or FAFSA. Do not be intimidated by the application process. I have personally completed the FAFSA application and it is straightforward and easy. Additionally, the FAFSA application is used not only for grants but for all Federal financial as well, so bookmark the link!

Federal and Private Loans
There are a several types of loans, and all of them fall within two main types, either Federal or private loans. Federal loans can be based on financial need as with the Direct Subsidized Loan, or not based on financial need with Direct Unsubsidized Loan. For graduate and professional students (think executive MBA programs, etc.), there are Direct PLUS Loan options, and then for those wanting to combine all their student loans together, there is the Direct Consolidation Loan.

Many different types of private loan options exist. Degree-specific loans are aimed at those degree plans in medicine, business, or law. International student loans are aimed at foreign students who may not have a credit history in this country and thus may not meet requirements for other private or Federal loans. Bad-credit loans sound ominous or “judgy”, but are designed for those with not-so-great credit or no credit; they typically charge a higher interest rate, so use caution. Several states offer private loans through state agencies, and are typically for state residents at state schools, so check with the state in question.

Whether you access the FAFSA application or apply with individual or state entities for financial aid, it is always a good idea to have any financial documents on hand to help speed the application process. Tax records, social security numbers, etc. are usually required to complete an application. Remember, the process will pay off in a literal and figurative sense, so be patient!

Loan Repayment
After selecting and using a student loan, the repayment process will begin. Repayment of student loans is expected after a person graduates, drops below half-time enrollment, or leaves school altogether. Typically, a six-month grace period exists between one of the triggering events and the beginning of repayment, but can be extended for active-duty service members, or those students who return to school before a grace period ends. Borrowers who have Federal student loans will be contacted by the U.S. Department of Education to coordinate loan repayment, while private loan borrowers will coordinate repayment with the entity that loaned the funds. Funds can be repaid at any time, in full or partially, and can sometimes be deferred until a later date.

An interesting topic in the political realm is that of student loan debt forgiveness. President Biden made student loan forgiveness an important issue during the presidential campaign of 2020, but the Federal government has yet to state any specifics about Federal loan forgiveness. In some cases, loans can be forgiven if the borrower agrees to complete certain work requirements, or has become disabled.

Whether you are a student or parent of a student, paying for higher education can be intimidating. Selecting a loan option, applying for funds, and then learning how to repay what you’ve borrowed can be a confusing and daunting task. With an open mind, some patience, and the right information, you can feel comfortable in your knowledge, make an action plan, and enjoy your education journey!

John Poole, CRPC
Financial Fitness Consultant
[email protected]

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