Financing Your Education
The U.S. Department of Education provides information on preparing for and funding education beyond high school with details on the federal aid programs. Another source of information on financial assistance is www.finaid.org. Both sites offer calculators to help you determine how much school will cost, how much you need to save, and how much aid you will need.
Paying for College 101
Many state governments have created 529 plans that make it easier for families to save for their child’s education. These plans, which can be sponsored by states or institutions of higher learning, encourage saving for future college costs, and the earnings grow tax-free. There are two main types: “pre-paid tuition plans” and “college savings plans.” Pre-paid plans allow you to pay for your child’s college tuition based on today’s costs, and then pay out at the future (higher) cost once your child is in college. College savings plans allow you to invest money in several investment funds, ranging in risk level, to pay for your child’s college education. For more information about the different types of 529 plans and the plans available in each state, visit collegesavings.org.
Other helpful college planning tips:
- Pay close attention to state and federal financial aid deadlines. You'll want to file well before the deadline though, so you can receive aid before funds run out.
- Check the Department of Education's student budget calculator. You can plug in tuition costs, room and board and other expenses along with how much money you have in student loans or grants to get an idea of where you stand financially.
- Make sure your college bound child gets involved in the process. Point them to College.gov where they can learn to manage their money in college and avoid common scams that target students.
Student Financial Aid
Student Financial Aid is available from a wide variety of sources including the federal government, individual states, directly from colleges and universities, as well as from numerous other public and private agencies and organizations. Whatever the source, all forms of college aid fall into four basic categories:
- Grants. Gift aid from grants does not have to be repaid and is generally awarded based at least partially on financial need.
- Work Study. The Federal Work-Study Program (FWS) is a federally funded source of financial assistance used to offset financial education costs. Students earn money by working and attending school. The money does not have to be repaid.
- Loans. Funds that are borrowed and must be repaid with interest are loans. As a general rule, educational loans have far more favorable terms and interest rates than traditional consumer loans.
- Scholarships. Offered by schools, local/community organizations, private institutions and trusts, scholarships do not have to be repaid and are generally awarded based on some specific criteria.
Federal Student Aid Information Center
The Federal Student Aid Information Center (FSAIC) can answer your federal student financial aid questions and can give you all the help you need for free. You can also use the FSAIC automated response system to find out whether your Free Application for Federal Student Aid (FAFSA) application has been processed and to request a copy of your Student Aid Report (SAR).
Federal Loan Program Repayment Information
- Public Service Loan Forgiveness Program.Offers forgiveness for outstanding federal loans for individuals working full time in public service jobs.
- Income-Based Repayment Plan. Helps to make repaying education loans more affordable for low-income borrowers.
Both programs offer generous benefits, but the rules may seem complex, so it is important to get all of the details. For more information on these repayment options:
Comparing Student Loans
The Consumer Financial Protection Bureau (CFPB) has a Know Before You Owe Student Loan website, developed in partnership with the Department of Education. It provides financial aid shopping sheets that help schools communicate the financial aid options available to students.