It is no secret that college costs have risen alarmingly and continue to do so. Parents and prospective students face a wide array of choices as they consider higher education alternatives. Public schools, private schools, online universities and for-profit institutions all offer varied opportunities and they all have one thing in common–serious costs.
A recent federal law now requires colleges and universities to show true costs in a more transparent manner. Every institution now has to provide a reasonable college cost calculator so parents and future students can accurately figure what the bottom line costs will be. Not all calculators are equal, however, and due diligence must be exercised when costs are calculated. Some colleges, for example, make lots of financial aid available for the first year in a practice called front loading. Once students are enrolled, aid is reduced for the following years. If a school seems to have lots of transfers after the first year, front loading may be occurring.
Parents and future students must also be wary of large automatic grants that some schools award to anyone who enrolls, because many times, these come with serious strings attached. In some universities if a student becomes ill and can’t finish a semester, a portion of the grant amount may have to be repaid.
After a student is accepted by a college or university, a financial aid package will follow. These packages will usually contain a mixture of loans and grants. Grants are many times income based while Federal Direct Loans are available to every student. In some instances, grants and federal loans will not be sufficient to meet the costs of education and the financial aid office may suggest private loans. Here parents and students must exercise extreme care because rules and regulations for private loans differ greatly from federal loans.
First, Federal Direct Loans automatically include many methods to defer or lower payments. In fact, students can routinely put off any payments for up to four years in a process called forbearance. While interest may accrue, new graduates can take this opportunity to become better established before loan repayment begins. Private loans, however, traditionally offer more stringent and less friendly repayment plans. Many have highly restrictive deferment rules and some don’t offer any kind of forbearance.
Before any college or university is decided upon, students and parents should research all available sources for proper student debt relief. Careful planning will avoid unpleasant debt piling up which may cause you to have difficulty in repay back.