Paying for College 101
Get schooled on the best ways to finance your degree(s)…
Financial advisor powerhouse Suze Orman lays out an intelligent and simple plan for parents and students, keeping debt reasonable. See her tips, which I’ve condensed and added to:
1.) Students should always borrow before their parents for a college education. There are valid reasons for this, just one would be the debt is the student’s responsibility, not the parents. Parents have their own set of personal debts to contend with and retirement ahead of them. However, parents or guardians should assist students in their quest to secure loans with necessary financial paperwork, emotional support and encouragement.
2.) Students should use the federal Stafford loans. They are fixed rate loans with flexible repayment terms and regardless of financial need–everyone is eligible. You never want a loan that has a rate which could change, therefore fixed rate loans are the only way to go. Stafford loans limits are $5,500-$7,500 for a dependent undergrad. Don’t be tempted by private loans–they are very expensive.
3.) Students don’t borrow more than what you realistically expect to make in salary at your first job. As an example: the OOH states a beginning salary for the particular field you want to pursue would be $35K–you borrow no more than that amount for your college loan. Financial aid expert Mark Kantrowitz (FinAid) found when total debt is more than a starting salary, defaulting on a student loan goes way up.
4.) Parents may borrow only if their retirement savings are on track. There’s no exception for this rule in Ms. Orman’s book! And if parents are doing well in their retirement savings plans, they should only borrow through the federal PLUS program, offering fixed rate loans with flexible repayment options. Again, you don’t want to go the private loan route.
5.) If all efforts fail to muster up enough for the student, consider the following: a less expensive school, a community college for the first two years, then transferring to a four year college nearby. I’ve advocated students opting for a local community college, living at home, and then transferring. It’s financially sane and allows the student to experience less stress, allowing them to concentrate on school.
Do you want more information regarding finances? See Ms. Orman’s new book, The Money Class: Learn to Create Your New American Dream, or ask her a question via oprah.com/omagazine_talk, or see her articles featured in O magazine.
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