No matter how much you save or how early you start, there is a good chance you will not reach the total amount to foot a college tuition bill. And if you factor in the cost of grad school, even an mba program online for example, the gap between what you have saved and the total cost is going to increase substantially.
The majority of people will never be able to save four year’s worth of college expenses but there are resources that can help bridge the gap. In 2009, more than $168 billion in financial aid was provided to families for college and graduate school costs. An additional $11.9 billion was borrowed from private investors or state sources.
If you are unsure what you need to do to get the rest of the cash necessary to pay for college tuition, here are some options to consider:
Grants/Scholarships
Grants and scholarships are usually the best option for college funding because the money is typically tax-free and students do not need to repay the money. The federal Pell Grant is geared towards low-income families. Currently for the 2010-2011 academic year, the Pell Gran is offering a maximum grant in the amount of $5,550 per student. Each year the grant amount does change based on available funding within the program. There is also the Federal Supplemental Educational Opportunity Grant given out by colleges to students based on need. Currently, undergraduates can receive up to $5,500 and graduate students can receive up to $8,000 per year. To get this type of grant, most students must work part time jobs as part of the work-study program to provide additional financial assistance.
Scholarships are widely available through a number of resources including high schools, colleges, community groups, employers, businesses, and philanthropists. Students should check in with their high school guidance counselor or their college admissions office for more information and resources for finding scholarships and other grants.
Loans
There are two basic categories of loans. First, there are need-based loans made for families that can not afford the costs of college. There are also non-need based loans that are meant to help families fill in the holes in their college savings amounts. These families may not have cash on hand but do have assets.
Two of the most common loans for college are both federally funded. The Perkins loan is available directly to students who will start repaying the loan nine months after graduating or leave school. Students have 10 years to pay the loan in full. Interest does not accrue on the loan until repayment begins and is set at a low rate, currently 5%. The eligibility for the Perkins loan is determined by the financial aid office of the school. Students can borrow up to $5,500 per year with a total limit of $27,500. Graduate students can borrow up to $8,000 per year and up to $60,000 cumulative.
Another loan that is popular is the Stafford which is federally subsidized. The Stafford loan does not accrue interest until six months after a student has graduated or leaves school. A student can borrow more money the longer they stay in school Starting in their freshman year, a student can borrow up to $3,500 and $5,500 after junior year.