The moment when your child heads off to college is one of the great milestones in their, and your, life.
For years, you’ve nurtured your son or daughter, cared for their needs, and tried to give them the best guidance and advice in life. You moved into a great neighborhood so that they would have good friends to play with and so you could sign them up for the best schools. Everything you’ve done is leading to this moment, the time in life when they head out on their own.
It’s important to prepare for your child’s university education ahead of time. Big decisions, from finding the best schools to looking at how to pay for the high costs of a four-year program, have to be examined and addressed. You’ll have to schedule campus visits, look for the best college housing, and help your kid put together everything they’ll need to pack for the first-year adventure far away from home. In addition, you’ll need to figure out the best way to pay for school.
Taking out student loans
The cost of a quality undergraduate education has skyrocketed, with annual expenses going up year after year. In order to pay for their schooling, most people going on to college apply for and take out student loans. When applying for financing, you can choose between federal and private loans. As implied by the name, the government offers federal loans.
More and more, borrowers are finding that private student loans also offer a good option for financing higher education. These are offered by credit unions, banks and financing organisations. When applying for this type of lending, it can be advantageous if the parent or parents offer to cosign on the note. This helps reassure the lender that the funds will be paid, which simplifies the qualification process.
Applying for student aid
As part of the process of applying to universities, each prospective student will fill out the Free Application for Federal Student Aid (FAFSA). This form includes income information from your tax return and also lists your financial assets and key expenses, among other things.
If you are eligible for student aid, then each school that accepts you will also send you a financial aid offer. Within the college acceptance letter, you will find a financial aid package or an award letter that outlines key things such as the Cost of Attendance and Expected Family Contribution. The offer will also list what scholarships, grants, and federal work-study programs you are eligible for and show how much of the annual cost of tuition, room, and board, books, and fees will be covered. The document will also show the availability of federal student loans.
Refinance your mortgage or tap into your home equity
Another way to come up with money for your kid’s education is to look at refinancing your mortgage. With rates at historic lows or with softness in the mortgage market, you can often save a lot of money each month by refinancing. Your new, lower mortgage payment will free up cash that can be used to pay for your child’s tuition and other expenses. It’s also possible to tap into your home equity. If your house has appreciated in value, you can take out a new mortgage for a higher amount at a very low interest rate. This will free up your home equity and you could then use those funds to pay for school directly or you could bank the money and use it to make repayments.