Prescription for a Headache: How do I pay for college?

21 06 2012

With summer underway, it’s time for college students everywhere to begin panicking wondering how to pay for the next year of higher education. Sadly, I’m no exception to that rule.

Right now, the financial aid letter from my college sits on the desk before me. I am eligible to borrow $5,500 in subsidized student loans and $7,000 in unsubsidized loans. These are just the Stafford student loans that are offered by the government. If that isn’t enough to cover the costs (it will cover my tuition costs, expected to be $11,200), a student must look to outside sources for financing.

Fortunately, my husband is an engineer and he supports our family with his salary. That means I’ll be able use all of my earnings to pay for my tuition, books and monthly pedicures. I might be able to scrape a few new clothes out of that amount, a great back-to-school haircut and color and save a few hundred for our fabulous 25th anniversary trip.

Last year, I borrowed $1500 in subsidized money and put that money toward our youngest son’s private education. I’m considering taking two terms of loans again this year ($1,800) so I can actually save enough money for our anniversary trip. I am usually the “fun master” at our house and save the big chunks of change needed for major trips. As I’m sure you’ve guessed, there hasn’t been nearly the “fun” around here with my big chunks of change heading to pay for my tuition at college.

Both of my sons will be taking student loans to finance their college again this year. I’m not sure how my youngest son is paying the $20,000 gap between the aid he’s been awarded and the necessary tuition and fees.

As I’m considering all this information, I thought I would share it with my readers. It may be nothing new, but it will help me with my decision process.

Direct Stafford Subsidized Loans

These loans are backed by the U.S. Government. I guess it’s up to you to decide if that’s really great security, or not. Perhaps, it would be more truthful to say these loans are financed by the Chinese. But I digress…

Subsidized loans accrue no interest until the note becomes due. As with all federal student loans, the note is due six months after the student is no longer a full or part-time student. At that time, I’m going to get the great interest rate of 3.4%. Many rates have jumped to 8.25%, which makes no sense with home lending rates at only 4%.

Direct Stafford Unsubsidized Loans

Unsubsidized means that you must make interest payments on your loan even while you’re in college. My oldest son took this sort of loan his sophomore year (he was the only one in college at that point) and has had to pay roughly $120 so far in interest on the $5,500 he borrowed that year. His interest rate is 6.4% on that loan, which is lower than if he’d borrowed from another source.

Private Sources

Thad and I will be checking out our local credit union for his student loan. I’m not sure what sort of rates or terms they offer.

I’ve also been checking with Discover Financial Services because I adore my Discover Card. I’ve been researching their student loan programs and their rates are 6.79% fixed or a variable rate that is currently 3.25%. I’ve had great success with Discover in the many years I’ve been with them and I’m leaning toward this avenue – if they will lend to my son, who is NOT a cardholder.

Check out their link: https://www.discover.com/student-loans/private-student-loans/undergraduate-student-loans.html

What sort of financing do you use for college? I’d love to hear your feedback.

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