College bill? Options aplenty
By Sandra Block
USA Today
Your child is starting college in the fall, and you're all choked up. Not because your baby chick is leaving the nest. That, you can handle. What has you crying in your beer is the stark realization that the bill for your child's tuition, room and board is due in a few weeks, and you don't have enough money to pay it.
At this late date, most financial aid packages and scholarships have been awarded, and there's not much time left to save. One alternative is a private student loan.
As the cost of college has soared, families have increasingly turned to these loans to pay for college costs that aren't covered by financial aid and their own savings. Private loans now account for 20 percent of all student debt, up from 4 percent a decade ago.
Rates and fees on private loans are typically higher than those for federally guaranteed student loans. Though some private loans offer low initial interest rates, the rates on these loans may balloon after your child graduates. And while private loans are easy to get — some lenders will provide the money in a couple of days — there are other, less-costly sources of last-minute funds for college:
"It's a debt-free financing option for parents," says Nina Vellayan, vice president of TuitionPay, an extended-payment program that's a subsidiary of student lender Sallie Mae.
Some schools provide a form for financial aid appeals, Chany says, while others ask you to just write a letter. Use hard numbers, not long-winded recitations of your troubles, to make your case.
If those strategies don't fill in the gaps, you may still have to borrow. But don't turn to private loans until you've exhausted less expensive sources of borrowing, including:
There are limits to the amount you can borrow each year. The cutoff for freshmen who start college this fall is $3,500. A free application for federal student aid can be filed electronically at www.fafsa.ed.gov.
PLUS loans carry a fixed rate of 8.5 percent. Rates on private loans range from 10 percent to more than 19 percent, depending on your credit score.
