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Q.
After accounting for all of the financial aid that
does not require repayment, like grants and scholarships, how
should I prioritize the various educational financing
options that are available?
A.
The good news is there are many options. You
should first consider options that require the least amount
of interest, finance or other charges. At the same
time, you relate the amount of these options to your
financial circumstances and understand that the
options with lower/lowest charges often have more demanding
payment schedules.
Q.
Which loan programs are best?
A.
While there are no absolute ways to determine which
loan programs are best, there are some general guidelines
and areas that will help to
help you choose the most affordable loan option.
Interest
Subsidy -- Subsidized loans (in which the government
or other agency) are far better than unsubsidized loans (in
which interest must be paid by the borrower from the loan's
disbursement).
Lowest Cost --
The loan's interest rates and fee structure determine the
amount of a loan's finance charges. Some loans (like
mortgages) allow you to pay up-front fees in exchange for a
lower interest rate. You should consider this feature
in relation to how long you plan to repay the loan.
The loans with a longer repayment period are often less
expensive with lower interest charges and a slightly higher
up-front fee.
Interest
rate options -- Programs offer different interest rate
options. Some are fixed and stay the same over the
life of the loan. Some are variable and tied to the
Prime interest rate (or other index). When the
interest rate changes also varies among programs. Some
change annually, some quarterly and some as often as
monthly.
Flexibility --
Consider the repayment options offered. Are payments
required during repayment? Can the principal be
deferred? Are alternative repayment programs (graduate
repayment or income sensitive, for example) offered?
Q.
How to choose an alternative loan program?
A.
There are many ways to compare alternative loan
programs. And oftentimes, a student's and family's
unique circumstances will determine what loan program makes
the most sense.
Alternative
loan programs differ in who the borrower is (the student,
parent or other co-applicant). You should refer to the
StaffordLoan.com page on Alternative
Loans for more information.
Q.
The amount of my student disbursements was less than
I was awarded by the school.
How come?
A.
Lenders are allowed to retain a percentage of the
amount you borrow in "guarantee fees" and/or
"origination fees".
Guarantee fees are used by the lender in creating a
reserve to protect the loan program in instances when
borrowers default on their loans. Origination fees are a processing fee retained by lenders.
The
Department of Education determines the maximum percentage
for guarantee and origination fees for Federal Stafford, PLUS and Direct loans.
The maximum origination fee in these programs is 3%,
the maximum guarantee fee is 1%. Lenders and guarantee agencies are not required to charge
this fee, and some have recently have developed 0% guarantee
fee programs.
For
alternative loans programs, there is generally no maximum
fee rate. Fees
for alternative loans can range from 0% to 10% or more
depending on the credit worthiness of the borrower and risk
associated with the loan.
Q.
How
is my EFC Calculated?
The
federal government proscribes an official federal EFC
calculation. This
calculation determines family resources available from a
family's income (less allowances for taxes and living
expenses) and assets (less allowances for retirement).
A percentage of these available amounts are earmarked
as EFC. You can
calculate an unofficial EFC right on the Internet. Click
Here.
Q.
Why
do some schools use an EFC that differs from what my Federal
EFC (on my SAR) says?
A.
Some
schools use an Institutional EFC calculation to determine
eligibility for non-Federal sources of financial aid.
This calculation usually considers additional family
resources, like home equity, that are not part of the
Federal EFC calculation. Click here
to learn all about the financial aid award process.
Q.
How
do I manage the difference between the school's cost and the
amount of financial aid I was awarded?
A.
There
are three main options available to students and families:
-
Contributions
from Savings -- a family might consider using savings or
investments to meet educational costs.
Families with assets that can be liquidated for
educational expenses generally have less reliance on
financial aid and pay less in fees and interest expenses
-
Contributions
from Income -- some families might be able to meet
educational expenses by allocating funds from their
current budget. This
options requires a family to closely analyze their
income and expenses and determine an amount that they
can pay on an ongoing basis.
Adjustments may have to be made to existing
household expenses to afford an amount to allocate from
Income.
-
Contributions
from alternative student loans -- some families must
consider alternative loans as a means to meet
educational costs.
While these options typically require the lowest
monthly payments, but also require the student and
family to pay interest and/or finance charges in
addition to the amount borrowed.
For
more information, check out our pages on Alternative
loans and Monthly
Payment Plans.
Q.
What
should I do if my family circumstances changed since
submitting my financial aid applications?
A.
Financial
aid officers have some latitude in determining what data is
used to calculate a family's EFC.
You should contact your school's financial aid office
with any circumstance that affect your family's income or
expenses.
If
you are able to document such circumstances (for example the
unemployment of a family member or medical expenses that the
family has incurred), the financial aid officer might be
able to incorporate these circumstances and recalculate your
EFC.
Q.
How
do I choose a College?
A.
While a very broad question, there is some basic
information that you can consider and many Internet
resources that can help you.
You
should obviously consider each college's academic offerings.
Are the programs broad enough (if you do not have a
major in mind) or focused enough (if you have a major in
mind)? Is the
college accredited? What
is the graduation rate for students at the school?
Does a particular school offer the program you're interested
in studying.
Are
you interested in a large or small institution.
Large institutions may offer less personal
interaction with professors or a higher student to faculty
ratio. Smaller
schools may offer a more intimate academic setting and more
personalized services.
Are
you interested in on-campus living or will you commute.
This will obviously determine if you look for schools
nationally, or close to home.
Is
cost and financial aid a factor?
If so use the Internet to learn about the college's
cost and information about the financial aid process and
applications the school requires.
Most schools also provide averages and statistics
about financial aid awards made to students.
Do
you require special services?
The links and searches below will help you identify
the specific offerings of schools.
You
should also consider the student life issues of the schools
you research and relate those offerings to your interests.
Are you interested in an active, vibrant social life?
Or are you interested in a more academically focused
environment.
College
Selection Resources:
You
can use these links to find more information about schools.
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