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Financing College


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Finding Ways to Pay for College

There are many different ways to finance college: scholarships, work-study programs, subsidized federal loans, unsubsidized federal loans, Sallie Mae loans, CitiBank "CitiAssist" loans (for part-time and non-traditional students), etc.

Stafford loans are student loans made available by the government, and are offered to all students, regardless of credit score or any other specific financial situation.  There is a six month grace period with Stafford loans, meaning that a student doesn't have to begin paying them off until six months after graduation, or three months after becoming a less than full-time student.

There are two types of Stafford loans: subsidized and unsubsidized.

Subsidized federal loans are offered to students with a demonstrated financial need, meaning that they have a lower family income.  The federal government pays the interest on these loans while the student is in school.  This means that if a student borrows 10,000 dollars, they graduate with a student loan debt of 10,000.

Unsubsidized federal student loans are different in that they accrue interest while the student is in school.  Therefore, if a student borrows 10,000 dollars while in school, and 2,000 dollars of interest accrues during their studies, the student will owe 12,000 dollars upon graduation.  Interest then begins to accrue on the 12,000 dollars.  Students may opt to pay on the interest while still in school.

Some students opt for loans from private companies, like SallieMae.  They offer signature loans to cover any costs beyond those that Stafford loans would cover.  They tend to have higher interest rates, but are very useful in meeting the overall costs of attending school.

If parents have their retirement fund perfectly set up and well-planned from a very early stage, they can then think about setting money aside (perhaps in a Roth IRA) that can later be put toward college tuition.

However, it is of the utmost importance for parents to realize that they should not bankrupt themselves or endanger their retirement funds by footing the bill for their kids' college education. There are other ways of helping your kids, and there are plenty of programs geared toward helping your kids finance college, but don't touch that retirement fund!