*POCSmom’s Insight: College Loans

Cliché: Pay back.  
POCS Reality: There are borrowing costs associated with education loans.    

 

More college graduates are struggling to repay their student loans:

http://sanfrancisco.cbslocal.com/2011/08/29/consumerwatch-more-college-grads-struggling-to-pay-student-loans/

Even after counting grants and scholarships, many families cannot afford to pay for college out-of-pocket, so they borrow. After applying for federal financial aid via the FAFSA (Free Application for Federal Student Aid), colleges may offer undergraduate students federal education loans that are regulated by the federal government. There are additional federal loans for graduate students (Grad PLUS) and for parents of undergraduate students (PLUS). Some families choose to borrow from private lenders that set their own interest rates and terms for repayment.

POCSmom’s insight: Do the math. There are borrowing costs such as origination fees and interest charges which will increase the cost of a college education. Estimate income potential upon graduation to calculate if borrowing is an affordable option and if so, what is the maximum borrowing amount that is affordable.

If borrowing, federal loans usually have more favorable terms than private loans. Federal loan features that private loans do not have include:

  • Limits to the annual amount and the aggregate amount students may borrow.
  • Forgiveness programs (all or a part of a federal loan may be wiped out and forgiven if meet qualifications).
  • Deferral and forbearance programs to postpone repayment.

The best college choice is the affordable school with the best chance for student educational and student/family financial success. It should have the programs, activities, and location the student wants and the costs the student/family can pay.

To fully enjoy the rewards of  a post-college future, it is necessary to plan wisely in the present.

*POCS: Parent Of a College Student

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