June 25, 2017



What Constitutes Financial Aid Money For College?

Financial Aid Money for CollegeJust like everything else the cost of education has risen greatly. Average tuition increases of more than 6% per year are common now. For example, back in 1973 the price to register at UCLA (University of California, Los Angeles) was round about $200 per quarter while today it is more than $2,000.

That ten times increase is not at all abnormal and many things now cost ten times more than they cost back in the 1970s. By contrast, incomes have risen roughly three times in the same time period from about $15,000 – $30,000 per year to approximately $39,000 – $42,000 per year. These numbers vary by age, gender and more but as a rough guide a threefold increase is about right.

However it’s not all bad news. There are far more types of financial assistance available today to both parents and students than there has ever been. Financial assistance, as its name suggests, is money which students and parents get from scholarships, loans and grants from Federal and private lenders to assist students to pay for their education.

Previously, students depended almost totally on Pell grants and Stafford loans to finance the cost of their education and living expenses. Today Pell grants are still issued but they are needs based and meet a small percentage of college costs today. Stafford loans are similarly needs based but can meet 25% to 40% of the average cost of school these days. Another form of aid is Perkins loans that are similar to Stafford loans but that are given only to particularly low income families.

Happily, PLUS loans (Parent Loans for Undergraduate Students) are also available now and these were not around a few years ago. These are loans provided for parents and not students to help parents to pay for their child’s education. Interest rates on PLUS loans are reasonable and there are a few restrictions and fees levied but they often form an important part of the student’s overall package of funding.

A quick word to the wise about fees. Most loans are for a specific sum of money such as $6,000 per year to be disbursed in several payments (usually once each semester). However it’s common for fees of up to 4% to be deducted from that amount before any funds are disbursed. This 4% fee on your $6,000 equates to $240 that you never see but that you have to repay. When you are searching for a loan ensure that you do your homework and see if you can find a low-fee or no-fee loan.

Although Federal loan programs such as the subsidized Stafford loan program have low fees and the government pays the interest, they are not the only source of financial assistance nowadays and are not necessarily the best choice.

Funding the cost of a college education nowadays is a complex operation and most students will have to assemble a funding package that includes scholarships, grants, government loans and private financing.

Fortunately, there are now far more sources of finance available than ever before and competition in the open market between private financial institutions in particular means that you can find funds at a price that is not necessarily going to run you into unmanageable debt.

It is also fortunate that you live at a time when getting hold of the information that you need to make wise decisions about the choices which are available to you is also quite easy.

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