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| Posted: Sat Apr 14, 2007 3:20 pm Post subject: Finance: The home stretch for student aid |
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WASHINGTON (Reuters) - Financial aid season is in full swing, and parents of campus-bound students have only a few weeks left to line up their best deals, or start finding alternative sources of cash for the fall.
This year is more challenging than most. College costs are higher than ever; interest rates on student loans are less attractive than they used to be; and a new scandal seems to indicate that you can't trust your school's aid officer to point you to the best loan.
But there are still ways to snag good financial aid and find alternative sources of money for college. Here's what to do now, if September is already staring you in the face.
-- Negotiate for more. Just don't use the word "negotiate" as college financial aid counselors hate it. Call or write to the financial aid offices of the schools that accepted your child, and let them know of any financial hardships you've had since you filled out the aid forms -- larger-than-expected tax or health-care bills, and the like. You can also let them know about better awards from other schools. Most schools don't like to admit they're willing to match offers, but many of them are. They don't call April "haggle month" for nothing.
-- Once your child chooses the school, accept the aid part of the package, which will probably include grants and work study and some federally-backed student loans. But don't automatically sign on for the additional loans that will be in the package. Those include federal PLUS loans -- "parent loan for undergraduate student" and additional private loans. That's because you might find better deals for them elsewhere. The rate on PLUS loans now is 8.25 percent; that's not a bargain, though some lenders might discount that rate.
Those private gap-filling loans are even more troubling. A recent probe by New York Attorney General Andrew Cuomo has uncovered evidence that aid officers at some colleges have profitable financial ties to lenders they are recommending to students.
-- Shop for your own loans. If you believe you must borrow to make the full tuition payments, look at alternative sources of loans before you sign up with the ones the bank recommends. Get a quote from your credit union. Find out if you can borrow from your own 401(k) plan. Search loans at simpletuition.com, a Web site which compares various education loans. If you own a home and aren't in over your head already, you may be better off taking a home equity loan, a second mortgage, or even refinancing your house, to take out money for college.
-- Think of alternative strategies. You may think your child has to rush straight to his favored four-year school, but think again. More students than ever are successfully embracing alternative funding methods, including the following: Spending two years at a less expensive community or state school and then transferring; working for a year between high school and college to save up money before starting school; finishing school part-time while working full time, taking heavy summer loads (back home at less expensive community schools) and finishing in three years instead of four. None of these strategies will ruin your child's life. Many of them will enrich it with experiences and a more substantial resume.
-- Use tax-smart cash management techniques. Federal credits for college tuition start phasing out at relatively low income levels: $45,000 for singles and $90,000 for joint filers. But your child can claim credits you can't. Once your child is over 18, you can give him appreciated stock. He can sell it, pay capital gains at his own presumably-lower rate, and use the proceeds to pay his tuition bills himself. He'll get the credits you won't be able to. If he's working (and college-bound kids should at least have a summer job), this could save your family some cash.
-- Scrounge. Sell the extra car, and make junior Greyhound it for a while. Use your soccer-free weekends to hold yard sales. Hit up relatives who may be willing to help or make a private loan. Ask the school to put you on a monthly payment plan to stretch out your expenses. It's all about cutting down on undergraduate borrowing, so that your kid doesn't graduate (or worse, drop out) with a big red debt rate cloud over his head. |
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