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Paying for Your College
 

Paying for Your College

Are you or your son or daughter heading to college this fall? Are you daunted by the costs and financing decisions? Ponder these facts:

* As reported by the U.S. Department of Education, more than 16.3 million students will be enrolled in colleges in 2006 in the United States -- you're not alone in making some tough financial decisions.

* During the 2005-2006 academic year, The College Board reports that the estimated average annual cost of attendance was $31,916 at a four-year private college, $15,566 at a four-year public college and $11,692 at a two-year college. As the saying goes, paying for college is like buying a car every year -- the only decision is whether it's new or used.

* Student loans have proved to play a key role in financing college and university students’ educations. The American Council on Education reported in its 2003-2004 survey findings that two-thirds of students, or their family members, currently depend on these loans to pay college expenses.

* Teen Research Unlimited states that teens spent $159 billion in 2005. When they leave for college, making good financial choices becomes even more important.

As noted by these statistics, handling finances is critical to college success. So how do college students find and manage the money? Here is the most important tip to make sound financial decisions when paying the bills: seek financial aid and good money management tools.

Simply put, financial aid is the money you can get for educational expenses. It’s designed to supplement the amount you and your family contribute. You’ll encounter four basic types of financial aid: grants, scholarships, work study and loans. Most students rely on federal programs for funding financial aid. To apply you must complete a form called the Free Application for Federal Student Aid, or FAFSA. If you want to take advantage of maximum federal funding for the fall semester, you must turn in the FAFSA as early as possible after January 1 of that school year.

Applications are available at high school guidance offices, the college the student plans to attend, or the U.S. Department of Education’s Web site at www.fafsa.ed.gov. One more thing -- even if you think you won't qualify for college financial aid, try anyway. You might be pleasantly surprised and receive financial aid. The following outlines financial aid and money management resources further:

Grants, Scholarships and Work Study – Finding Free Money

Federal Pell Grants are awarded to part-time and full-time undergraduate students who show financial need. Like all grants, it does not have to be repaid. Federal Supplemental Educational Opportunity Grants are a supplement to Federal Pell Grants. Funds are limited, so apply early.

To find scholarship opportunities, start your search early - December or January for the next school year - and utilize the resources around you. Begin with your high school guidance counselor for a list of possible resources. Next, check with the college financial aid office. Most states and many colleges offer scholarships, so students should also inquire about them. Think small -- competition can be tough for large awards. Smaller awards ($1,000 and less) typically have less competition and are easier to obtain. Finally, the Internet and organizational Web sites are excellent places to search. Remember, this information should always be free.

For example, at www.usbank.com/studentbanking, you can apply to be one of 30 high school seniors to receive a $1,000 U.S. Bank Internet Scholarship. Over the past ten years, U.S. Bank has awarded more than $290,000 in scholarship funding for this program. Scholarship award recipients are selected through a random drawing process. You must be planning to attend an accredited two- or four-year college full-time next fall. The U.S. Bank Web site also features a powerful scholarship search engine that contains approximately 1.8 million awards valued at more than $7.9 billion.

The Federal Work Study program gives students the opportunity to earn money for school and gain valuable work experience. It’s available to both undergraduate and graduate students with financial need. The amount you can earn depends on several factors: need, other aid received,
and availability of school funds.

Student Loans -- Financing the Big Expenses

Student Loans are some of the most commonly used financial tools. They are funds borrowed from a financial institution or federal or state government. Education loans must be repaid. There are at least three types of education loans:

* Federal Perkins Loan is a federal loan program administered by colleges. It's available to both undergraduate and graduate students and is based on need and the availability of government funds. The annual fixed interest rate is five percent. Repayment begins nine months after the student leaves school or is less than a half-time student.

* Federal Stafford (student) Loans and Federal PLUS (graduate student and parent of undergraduate student) Loans are available through financial institutions, such as U.S. Bank, that participate in the FFEL program or through the federal government in the direct loan program. Most students qualify for these kinds of loans and, depending on financial need, may be eligible to have the interest subsidized by the government while in school. As of July 1, 2006 through June 30, 2012, rates are 6.8 percent fixed for Stafford loans and 8.5 percent fixed for PLUS loans.

* Supplemental loans for students or parents are available at participating colleges or directly to the borrowers. They are not based on need. These variable rate loans can be used as a supplement or replacement for federal loans. U.S. Bank offers a number of supplemental loans where students can borrow up to the entire annual cost of attendance, minus other financial aid received, at competitive interest rates.

Checking Accounts -- Paying Everyday Bills

Moving in, finding the dining hall, the first week of classes - students have enough to worry about without having to worry about their day-to-day finances. That's why it's important for students to set up a checking account as soon as they arrive on campus. A checking account, combined with a check card, is the most convenient way for a student to manage finances at school. Not only can students pay bills, but also make everyday purchases -- like books at the campus bookstore -- with a check card. When a check card is used for purchases, the money will always come directly out of their checking account, so debt cannot be accumulated.

Plastic Cards -- Controlling Spending

College students need money for many things in their busy lives -- books, gas, clothes, travel and emergencies. Reloadable prepaid cards are perfect tools. For example, the prepaid U.S. Bank Visa (R) Buxx Card has benefits for both students and parents. It's safer than cash, plus there's no risk of debt because students can only access the funds preloaded to the card. Parents load the card, track purchases and balance information online and can even set up an automatic allowance schedule. Students may use the card everywhere Visa debit cards are accepted, including online and at ATMs.

Shopping for everyday needs and larger purchases will probably be a new experience for most college students. Finding a conservative, low-cost credit card may now prove to be a necessity. Be careful of low introductory rates that often increase soon after the cards are used. Instead, find cards with reasonable interest rates and low maximum balances and spending limits. Even more helpful is for students to pay off their balance monthly and incur no interest charges. Newer cards now allow students to earn rewards for all purchases. The U.S. Bank College Rewards Visa Card allows students to manage their own finances, while earning points towards free entertainment and merchandise -- as they can earn one point for every net purchase dollar charged. Online access is also important in order to view account balances, and manage and redeem reward points.

Given the students’ unique financial needs during college, it is critical to make good financial decisions before setting foot on campus. When students learn to manage finances through financial aid, student loans, and bank accounts, they gain a valuable financial education that will serve them well in college and beyond. - ARA

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