How to pay for collegeBy The Cooperative Extension Service
U of A System Division of Agriculture
- Sallie Mae Survey: Families use combination of funding sources
- Don’t use credit cards to pay for college
LITTLE ROCK -- For students heading to college this fall, funding deadlines are quickly approaching, so it’s crunch time for financial decision-making, said Laura Connerly, assistant professor and family finance expert for the University of Arkansas System Division of Agriculture.
The SLM Corp., better known as Sallie Mae, is a publicly traded U.S. corporation that offers financial products to help families save, plan and pay responsibly for college.
“According Sallie Mae’s 2014 survey ‘How America Pays for College,’parents and students cover college expenses with a variety of sources: grants, scholarships, savings, income, and loans,” Connerly said. “Careful consideration of funding options can help families stretch their dollars.”
Here’s a look at potential payment options for families with college-bound students:
Grants and Scholarships: Grants and scholarships are the preferred source of funding. “Many academic scholarships have been awarded by the end of the school year, but there may still be some funding available,” Connerly said. “Check with your college financial aid department information and application due dates.” The deadline to apply for the Arkansas Academic Challenge Scholarship is June 1. Grants and scholarships typically cover only about 26 percent of the average student’s expenses.
Savings and income: About 45 percent of college costs are covered by parents’ and students’ savings and income. “It’s not too late to get a summer job to help defray college costs,” she said. “Working part-time during the school year is also an option to consider.”
Loans: About 30 percent of students have some type of student loan. Loans can be federal or private. A completed Free Application for Federal Student Aid, or FAFSA, is required to qualify for all federal and some private loans. The deadline to complete the FASFA is June 30.
- Limit Loan Amounts: Borrow only the minimum amount you need to cover college expenses. Don’t automatically accept the full amount that you are eligible to receive. Don’t use loans to finance a lifestyle.
- Federal Loans: Explore federal loan options before looking at private loans. Federal student loans cost less than private loans and have more protections for repayment. Apply first for the Perkins loan, which has a fixed 5 percent interest rate. Next consider federal direct loans.
- Private Loans: Use private loans as a last resort. Shop around to compare interest rates and repayment plans. Loan forgiveness and repayment programs typically don’t apply to private loans. Sources of private loans can include state agencies, banks and schools. Be sure to use a reputable lender. Be cautious of deceptive student loan practices.
Credit Cards: Don’t use a credit card to pay for college. “It’s OK to have a credit card, but be sure to charge only amounts that you know you can easily repay,” Connerly said. “Students under age 21 must have a co-signer or proof that they have the ability to pay.” Used carefully, a credit card can be a good way to establish a good credit history. For example, use the card to purchase textbooks; make regular payments; pay off the debt in a timely manner.
For more information, Connerly suggests visiting these site:
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Media Contact: Mary Hightower
Dir. of Communication Services
U of A Division of Agriculture
Cooperative Extension Service