The frustration over rising college costs is nothing new, but the news that college debt nationwide recently passed $1 trillion has re-opened old wounds and led many well-meaning people to offer advice to families that are trying to figure out how to pay for college. The problem is some of the advice isn’t true – at least not for everyone.
This story will set straight five widely held assumptions:
Community colleges will save you a bundle. Attend a community college for a couple of years, save tens of thousands of dollars, then transfer to a four-year university that accepts your credits. This makes for students who are driven and ambitious, but the odds are against students who aren’t. New research shows that those students are less likely to eventually earn a bachelor’s degree than students who attended a four-year college right after high school.
College costs are a complete guess until after you’ve been accepted. Colleges now post cost calculators on their websites, and the better calculators give students a pretty good idea of how much they might receive in scholarships and how much they might have to borrow. The very best ones show you how grade point averages, standardized test scores and advanced placement scores could affect scholarships and other financial aid.
The financial aid package you receive as a freshman is the one you’ll have as a senior. Not true. At many colleges, financial packages change from year to year, with students receiving fewer scholarship dollars and more loans over time. Colleges will tell you they won’t know for sure until after they review the Free Application for Federal Student Aid (Fafsa), which must be re-filed every year.
The interest rate is God. Many families that shop for loans are obsessed with the interest rate and don’t consider the implications of variable rates. Initial rates from private lenders may be low, but very often those loans come with variable rates, which rise. Before you obtain one of these loans, educate yourself about the worst-case scenarios. Keep in mind that federal government loans are more likely to offer fixed rates, which may be higher than initial rates from private lenders. But fixed is fixed.
All lenders act the same. Some students may have a difficult time repaying their loans, so they should know that some lenders have a heart and some don’t. The federal government tends to be more forgiving than private lenders. Federal loans come with options that allow borrowers to change their payment plans and even defer repaying loans. Private lenders are less likely to be tolerant and may charge steep fees to borrowers who are struggling to repay loans.
When it comes to paying for college, there really is so much to learn, but assume nothing – even if your best friend tells you it’s true.
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