Financing College 101

Financing College 101

1.    Students always borrow before parents. 

2.    Students use federal Stafford loans.  These are fixed-rate loans with flexible repayment terms, and everyone, regardless of financial need, is eligible.

3.    Students borrow no more than they expect to make at their first job.  Financial aid expert Mark Kantrowitz (finaid.org) has found that when total debt exceeds your starting annual salary, the odds of defaulting go way up.

4.    If the Stafford Loan limits ($5,500 to $7,500 for a dependent undergraduate) don’t cover what the student needs, don’t be tempted by private loans. Consider a school that’s a cheaper alternative.

5.    Parents borrow only through the federal PLUS program, which offers fixed-rate loans with flexible repayment options.

6.    Parents and students should not be willing to take on massive debt.

A valuable tool in educating about school loan debt is Dave Ramsey.