College Savings and Loans
According to a survey by Sallie Mae, families are under increasing pressure to take out loans to finance college, spending 16% more last year than the previous year — the biggest increase in five years. Here’s what the college financing company found:
– Parent out-of-pocket spending was the number one source used, surpassing scholarships and grants (30%) for the first time since 2010.
– Among families who did borrow, the student signed for nearly three-fourths of the amount borrowed.
– Working students are now the norm, with 74% of students working at some point during the year) to help cover costs.
Saving for college seems like the best alternative, but there are some misconceptions about the process.
Not enough disposable income
While it is true that many Americans don’t have much left after paying rent/mortgage, taxes, insurance, and saving for retirement, disposable income is also a matter of spending less. Look at what you’re spending and tick off a few items that could save you some money. As an example, the average person spends about $20 a week on coffee, which is about $1000 a year! By making your own coffee at home, you could be saving a fair amount.
We don’t qualify for financial aid
Well, that’s not entirely true. There are two different forms of aid: merit and financial aid. The former is not based on financial need. There are tens of thousands of these scholarships and grants available. See FinAid.Org for a list of them.
As for financial aid, there are many factors taken into consideration. You can always fill out the FAFSA form, and send it to the colleges of your choice. It costs you nothing.
We could use our retirement money or home equity loan
You could, but it’s not something that is recommended. Here’s why: it’s hard to replace your nest egg once it’s gone, and adding debt to your household will only increase the financial burden on you.
The bottom line is this - you don’t need to take a loan out to pay for college. If you can’t afford the tuition, there are always other options: scholarships, financial aid, or community and commuter colleges.
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