By Anna Guido
What parents and students don't know about college financial aid can hurt them. The answer, experts say, is to do your homework.
"You need to ask lots of questions and be a good consumer. If you do all of those things, you'll find a way to make it affordable," said Ellen Frishberg, director of student financial services at Johns Hopkins University in Baltimore.
More than 16 million undergraduate students nationwide are planning to attend college this fall. And up to 45 percent of students will pay for college without financial aid, according to the National Center of Education Statistics.
The average student graduating with a bachelor's degree will leave college with about $20,000 in debt. But with federal student-loan interest rates at historic lows, many costs can be managed.
"Even though costs have gone up, the price of borrowing has gone down," Frishberg said.
For example, at 8.25 percent, students would repay $22,077 on a $15,000 loan. But at 2.5 percent (a rate available on some loans) a $15,000 loan would cost $16,968. By saving money on lower interest fees, students can more easily absorb tuition increases.
The federal PLUS loan is available at a record-low interest rate of 4.22 percent.
Some lending groups' rates are even lower, including those offered by Student Loan Xpress Inc.. A subsidiary of Education Lending Group in San Diego, Student Loan Xpress has offices in Cincinnati. Its PLUS loan offers a 2.22 percent interest rate.
You can qualify for PLUS loans regardless of income. There is no collateral requirement or prepayment penalty.
Student Loan Funding Resources, another Cincinnati student loan lender, has its own private loan program, but also offers the federal Stafford loan at 3.42 percent, said client services representative Kevin Bales.
Stafford loans allow undergraduate students who are dependent on their parents to borrow on a subsidized basis (meaning, no interest accrues while attending school) up to $2,625 during their freshman year, $3,500 their sophomore year and $5,500 each year thereafter.
Stafford loans are based on financial need, and repayment is deferred until at least six months after graduation or withdrawal.
The biggest difference between Stafford and PLUS loans is that payment is not deferred on PLUS loans.
Because education financing can be so arcane, many students turn to college financial aid offices to find affordable options.
"The dream of a college education for all students who have the drive and determination to succeed is still alive but it's more and more challenging to put together aid packages to make that possible," said Jim Williams, University of Cincinnati's director of enrollment services and former director of student financial aid.
UC offers a class for freshman on how to budget, manage debt and reduce expenses.
"There are some great deals out there, but they are still loans that have to be repaid," Williams said.
Financial aid tips
Tips from financial aid offices for families to remember as they prepare for the 2004-05 school year:
Call your financial aid office early and often. "Establishing a relationship with the financial aid office early is key," said Dana Kelly, director of financial aid at High Point (N.C.) University.
Understand what "Cost of Attendance" really means. "Be sure you include not just tuition and fees, but also room and board, books and transportation costs," said Eileen Doyle, executive director of financial aid at New School University. Knowing precisely what financial aid awards are directly credited to tuition and on-campus housing will help families determine what parent and student loans they may need.
Manage the financial aid process carefully. At this time of year, many parents are receiving financial aid award letters based on the Free Application for Federal Student Aid and the Expected Family Contribution assessed for each family. But don't think that the original award letter is your last chance for assistance.
Know when the money will be available.
Meet deadlines and stay in touch. "Provide all documentation early to your intended school and follow up to ensure receipt," said Luis Aquiles, director of financial aid at University of Sacred Heart in Bridgeport, Conn..
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