In this current financial climate potential home buyers are not the only ones struggling to find loans. The mortgage crisis has spilled over into other areas of lending as well, such as student loans. Media reports about possible student loan shortages have left many students wondering about how hard it will be to find financing for school.
Due to the high cost of college tuition many families are unable to pay for college with savings alone. Traditionally, the availability of student loans has provided an important avenue in allowing students to be able to go to college. However, many lenders have stopped offering public or private student loans. Many lenders that are still offering loans are charging higher interest rates and/or fees. Even though paying for school may seem like a daunting task there are several steps you can take to find financing:
- Talk to your school’s financial aid office. Employees at financial aid offices are trained to help people find financing for school and have dealt with many others in the same situation as you. Ask them what lenders still offer student loans and what your other options for funding are.
- Look for scholarships and grants. It is a good idea to look for scholarships and grants regardless of how easy it is for you to find student loans. Why borrow when you do not need to? High school guidance counselors and college financial aid offices usually have information on available scholarships and grants. Information is also available at www.finaid.org.
- Consider a home equity line of credit or loan. For parents with a significant amount of equity in their homes this may be a good way to help finance college. Interest rates are usually fairly low, and the interest is tax deductible as well. However, it is important for those considering this option to remember that home equity lines and loans are secured debt. You could lose your home if you do not make payments.
- Stay informed. Congress is working on ways to ensure that student loans remain available. Watching or reading relevant stories in the media will help you to be better aware of what your options are and what new opportunities are created.
Preparing for the future
For parents, the current student loan crunch demonstrates why it is a good idea to save for college. Even if student loans are readily available when your children go to college, saving allows them to rely less on loans, which they will need to pay back after they graduate. If you are saving for college take advantage of available tax-saving vehicles. For example 529 Plans, Coverdell Educational Savings Accounts, and Series EE Savings Bonds (issued by the Department of the Treasury) allow you to invest savings for college and not pay taxes on earnings, as long as the funds are used for qualified education expenses.
College tuition is high, and paying for college is often not an easy task. However, there are several options for funding available, and being well-informed can help you prepare for and manage this cost.