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The Best Way to Borrow for College
With the high cost of college the reality is most families will have to borrow to fund college. What is the best way to borrow for college? This is one of the questions I get asked the most. The answer is usually different for every family depending on their situation. However, there is a bigger question that relates to every family. How long does your 18 year old student have to pay back student loans compared to you?
For many families that need to borrow I recommend starting with the Stafford Loan. This is an entitlement loan that every student can receive as long as they fill out the FAFSA form and their college participates in accepting federal money. This loan is in the name of the student and they are responsible for repaying it!
This loan comes in two varieties. Subsidized and Unsubsidized. Although every student can get this loan, only students that show a need will get the subsidized variety. A subsidized loan simply means that no interest accrues on the loan while the student is in college.
Students can borrow as follows:
- Year 1 $5,500
- Year 2 $6,500
- Year 3 $7,500
- Year 4 $7,500
These loans currently carry an interest rate of 6.8%. The payment can be deferred until 6 months after graduation. The repayment terms are very flexible, especially if the student has trouble earning a good income upon graduation.
Although, I believe it is wise to limit debt. I feel that it is a good idea for the student to have some “skin in the game”. Studies show that student’s who pick up some of the tab and share the responsibility for paying for college tend to take it more seriously, do better, and get through faster.
Call or email me today to set up a time we can speak for 5 to 10 minutes to see if we would be a good fit. The sooner you begin the more potential savings you can realize.