Federal and private loans are the best way to fill any savings gaps you may have to pay for college. (iStock)
A recent survey found that most families plan to take on some debt to pay for college, even as they save for this momentous event.
About 42% of families said they plan to rely on federal student loans, and 16% said they plan to use private loans to pay for college, according to College Avenue. investigationThese parents estimate they will borrow more than $46,000 over four years, and some families (19%) plan to take out up to $68,000 in parental loans to make up for a college savings gap.
Beyond debt, families are also considering debt-free options to raise cash or cut costs to pay for college. For example, 56% of families have budgeted for four years of schooling, 10% plan to have their children live at home, 17% said they plan to take on a second job or hustle to help pay for college, and 39% said their children will work to help cover the costs.
“College Avenue research shows time and time again that funding a college degree is a top priority for families,” says Angela Colatriano, chief marketing officer at College Avenue. “With so many resources available to pay for college — scholarships, grants, earnings and savings, loans, and more — pulling it all together can feel like a daunting task.”
If you’re currently in school or will soon be enrolled and need more financial aid than you can get on the Free Application for Federal Student Aid (FAFSA), consider taking out a private student loan. To find private interest rates that won’t affect your credit score, visit Credible.
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Tuition fees are higher than expected
Another College Avenue survey found that about 66% of students said the cost of college was higher than they expected, and 26% said the cost was more than $10,000. investigation.
The cost of higher education remains a major expense for families who often underestimate its costs: Even when adjusted for inflation, costs have skyrocketed over the past 40 years, according to figures reported by the Commission on Higher Education. Education Data Initiative.
Between 2000 and 2020, average tuition inflation at higher education institutions outpaced wage inflation by 111.4%. Currently, students attending a state public four-year college or university will pay an average of $26,027 per year. Students from out of state and those attending private schools typically pay more in tuition.
“Perhaps that’s why the majority of people report that paying for college is stressful (68%) and, for some, confusing (46%),” College Avenue said. “Despite the surprise, stress and confusion, many college students have demonstrated extraordinary enthusiasm for their education and are finding creative ways to finance their college education while balancing their personal financial goals.”
Private student loan borrowers can’t benefit from federal loan relief. But they can reduce their monthly payments by refinancing to a lower interest rate. Visit Credible to speak with an expert and get your questions answered.
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Tips for borrowing wisely
Many families plan to borrow money to help pay for the ever-increasing costs of college. If you’re going to borrow money to pay for college, there are some things you should consider up front to make it more manageable.
Borrow an amount you can repay
A good rule of thumb is to not borrow more than a student’s expected first-year salary.
According to CollegeAve, “Make sure the total amount borrowed does not exceed what your child expects to earn in the first year, which will increase the chances of paying off their student loans within 10 years.”
Know the amount to pay
To keep your debt manageable, you need to know how much you owe in order to create a budget, but 40% of respondents didn’t know how much their monthly student loan payment was.
Choose repayment terms that suit you
Flexible repayment options tailored to your needs help you stay on track with your obligations. Some borrowers choose low monthly payments over a long period of time, while others opt for a shorter repayment term.
Start repaying early
No matter how small the amount, if you start making payments today, you can reduce the total cost of your loan.
When taking out private student loans to pay for college, it’s important to find a lender that offers a reasonable interest rate, flexible repayment terms, and is trustworthy. Visit Credible to learn more about private student loan options and get personalized interest rates from multiple lenders without affecting your credit score.
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