How to Pay for College If I Go?

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It’s clear that a college degree usually makes a huge difference in income. However, it won’t necessarily pay for itself if you get saddled with too much debt. Doing everything you can to minimize the amount you owe after graduation will help make college worth it.

The first thing to ask is, “Do I really need the benefits of a name-brand college?” Remember these details:

  • Less than 10% of employers consider where you go a top priority.
  • Those who graduate from selective colleges usually make 7% more than those who graduate from less selective schools. They don’t make any more at all in some cases. In contrast, choosing a high-paying major over a low-paying one can more than double your potential income.

It seems it’s not too important to go to a famous undergraduate school unless you’re planning to enter an extremely competitive field. Where you go determines the amount you invest. Your major is the most critical determiner of your returns, and your SAT scores are better predictors of how much you will make.

If you don’t need the networking opportunities of an expensive private school, or if it isn’t your dream to land in a big Wall Street or Silicon Valley firm right out of college, then you might be better off saving the money and going someplace less expensive.

After choosing a college, the question of how much it costs becomes a moot point. It’s time to figure out how to pay for it.

The first thing you should do is apply for all the aid you can get.

Low-income families are eligible for a number of assistance programs. One such program, the Federal Pell Grant, is available to those applying to any one of 5,400 colleges. It currently offers up to $5,775 in tuition assistance that you do not need to repay. Apply for this and any other income-based assistance programs you can first.

Next come scholarships. Scholarships are available in abundance for students in almost every field. They often have no income level restrictions, and can get you anything from a couple hundred dollars to a full ride. This subject could easily take up a whole book, so let me just say that a great place to start is the Federal Student Aid website. Their main page on finding scholarships is currently located at https://studentaid.ed.gov/sa/types/grants-scholarships/finding-scholarships.

While John Boucher had a tough time finding a job with his degree, he managed to avoid graduating in debt because he used these strategies. “The amount of money I had to put in was . . . negligible,” he said. “I graduated without owing a penny, which was lucky for a lot of reasons. The combination of need-based grant aid and scholarships to fill in the rest paid for everything except [the amount covered by] the work-study I did, which was just ten hours a week.”

Students aspiring to go to college should start applying for scholarships while they’re in high school. But of course, for some of you reading this, it may be too late for that. Most will also find that the scholarships and grants they manage to secure don’t nearly cover the cost of attending college.

At this point, your next solution should be direct payments. Students should pay in anything they can from summer jobs and whatever part-time work they can manage on top of their education. Parents should contribute as much as they can reasonably afford to, remembering that their children have tuitions three or four times higher than they did. It may even be a good idea to ask Grandma and Grandpa for help.

Only then should you start looking at loans.

After all the above options have been exhausted, aim to make up the remainder with federal student loans. Federal loans have enormous advantages over private loans: significantly lower (and typically tax-deductible) interest, a variety of options for deferring or reducing your payments, and lower barriers are just a few of them.

If you’ve never been in debt, trust me when I say that lower interest rates are your best friend. Even on federal loans, interest can easily consume a third of your monthly payments if you’re paying the minimum. Private loans can be much worse.

Private student loans should be considered a last-ditch option. The only things I can really say they’re better than are going into credit card debt, borrowing money from the Mafia, or literally selling your soul for a degree. The high interest rates and frequently nasty terms can make repayment a nightmare. That, in turn, can result in catastrophic damage to your credit score.

In short, large private loan burdens can destroy the advantages of having a degree. Avoid them if at all possible.

How Can I Pay Off My Loans Once I Graduate?

Like getting scholarships, student loan repayment deserves its own book—or at least its own website. You can find federal student loan repayment information at https://studentaid.ed.gov/sa/repay-loans and advice on repaying all varieties of student loans at http://www.paymystudentloans.com/.

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