There are a variety of financing options available for families who are concerned about their ability to meet their family share of costs. These alternative sources of aid, most often in the form of loans, can help families cover financial aid "gaps," or unmet need in a financial aid package.
Student Loans If your student meets certain criteria, he/she could qualify to borrow an additional student loan such as an unsubsidized Stafford loan or a private education loan. Note: these loans tend to be more expensive than need-based loans.
Federal Unsubsidized Loans
Students who don't demonstrate need, or need to borrow more than the subsidized loan amount, can borrow unsubsidized Stafford loans. Unlike subsidized loans, your student is responsible for paying interest on the loan while in school.
Private Student Loans
There are a number of privately-funded (non-government) loans available to students to help meet the family share. These loans are also known as alternative loans or supplemental loans.
Parent Loans
Parents can also take on loans to help cover the expected family contribution. Certain rules -- such as demonstrating good credit -- will apply, depending on the loan. Parent loan options include federal PLUS loans and private loans.
Federal PLUS Loans
This is the most popular loan for the parents of dependent undergraduate students. You can borrow up to the full cost of education minus any financial aid with a variable interest rate. Under current federal regulations, the rate can never exceed 9 percent. Repayment of both interest and principal begins 60 days after the loan is fully disbursed to the school.
Private Education Loans for Parents
There are a number of private (non-government) education loans for parents. Many of these loans are available from banks.
Home Equity Loans
If you are a homeowner, it's likely that you can "borrow against your home." You may be eligible to borrow as much as your equity, which is the difference between the market value of your house and how much you owe on your mortgage. This money can be used to pay for education costs. The rate is comparable to other borrowing options.
An advantage of a home equity loan is that the interest you pay may be deductible on your federal tax return. A disadvantage is that you may have to pay a fee for this type of loan.
IRA Withdrawals An IRA is a savings account designed to put aside money for retirement. The main options are the Traditional IRA and the Roth IRA.
Under either plan, you can be charged a ten percent fee if you withdraw money before you reach age 59 1/2. If the money is used to pay for college expenses, the ten percent fee is waived. However, you may be required to pay federal and state income tax on your withdrawals.
Tuition Tax Credits
A tax credit is an amount of money you can subtract from your federal tax bill. It is a dollar-for-dollar reduction of the amount you owe. If you have family members in college, and your income doesn't exceed certain limits, you may apply for a credit of up to $1,500 per year.
*Information excerpted from the College Board website (www.collegeboard.com)
Student Loans If your student meets certain criteria, he/she could qualify to borrow an additional student loan such as an unsubsidized Stafford loan or a private education loan. Note: these loans tend to be more expensive than need-based loans.
Federal Unsubsidized Loans
Students who don't demonstrate need, or need to borrow more than the subsidized loan amount, can borrow unsubsidized Stafford loans. Unlike subsidized loans, your student is responsible for paying interest on the loan while in school.
Private Student Loans
There are a number of privately-funded (non-government) loans available to students to help meet the family share. These loans are also known as alternative loans or supplemental loans.
Parent Loans
Parents can also take on loans to help cover the expected family contribution. Certain rules -- such as demonstrating good credit -- will apply, depending on the loan. Parent loan options include federal PLUS loans and private loans.
Federal PLUS Loans
This is the most popular loan for the parents of dependent undergraduate students. You can borrow up to the full cost of education minus any financial aid with a variable interest rate. Under current federal regulations, the rate can never exceed 9 percent. Repayment of both interest and principal begins 60 days after the loan is fully disbursed to the school.
Private Education Loans for Parents
There are a number of private (non-government) education loans for parents. Many of these loans are available from banks.
Home Equity Loans
If you are a homeowner, it's likely that you can "borrow against your home." You may be eligible to borrow as much as your equity, which is the difference between the market value of your house and how much you owe on your mortgage. This money can be used to pay for education costs. The rate is comparable to other borrowing options.
An advantage of a home equity loan is that the interest you pay may be deductible on your federal tax return. A disadvantage is that you may have to pay a fee for this type of loan.
IRA Withdrawals An IRA is a savings account designed to put aside money for retirement. The main options are the Traditional IRA and the Roth IRA.
Under either plan, you can be charged a ten percent fee if you withdraw money before you reach age 59 1/2. If the money is used to pay for college expenses, the ten percent fee is waived. However, you may be required to pay federal and state income tax on your withdrawals.
Tuition Tax Credits
A tax credit is an amount of money you can subtract from your federal tax bill. It is a dollar-for-dollar reduction of the amount you owe. If you have family members in college, and your income doesn't exceed certain limits, you may apply for a credit of up to $1,500 per year.
*Information excerpted from the College Board website (www.collegeboard.com)