Paying for College...What are your Options?

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So now that you have determined the estimated cost for the school you plan to attend, let us look at payment options. If you have not already estimated how much it will cost to attend school. Please take a look at How to Estimated your Student Bill. 


Filling the Cost Gap

Now it is time to figure out how to fill the cost gap. Here is a list of payment options to review. 

Payment in Full 

The best and cheapest option is to pay in full.   There should not be any fees associated with this payment option.The only fee you may run into is a credit card fee.  Most colleges and universities pass this fee onto the families, but schools will take checks and cash.  

Payment Plans 

The majority of universities offer some sort of payment plan.  The most common one is a 10 month payment plan starting in July ending in April. Because schools typically have third parties managing their payment plans there is a fee to sign up for a plan.  This fee ranges between $40-$120 per year.  If the fee is just a one-time fee, ask for the longest payment plan possible to make your monthly payment as small as it can be.  

Direct Loans 

When you completed the FAFSA, information was sent to the school of your choice. The school used federal guidelines to determine your eligibility for direct loans. These loans will be listed on your award letter with the amounts for which you qualify. Typically, these loans are the best loans a student can borrow due to low interest rates and repayment options.

Subsidized Loans
D
irect loans that the government pays the interest while the student is enrolled at least half-time. Once the student graduates, withdrawals or drops below half-time enrollment, interest will begin to accrue on the subsidized loan. After the subsidized loan has been awarded, schools will award the student their remaining eligibility in unsubsidized loans.  

Unsubsidized Loans
D
irect loans that accrue interest during the time the student is enrolled. The interest is just accrued on the principle amount, not the principle and interest. 

Both subsidized and unsubsidized loans are in the student’s name. The student will need to complete Entrance Counseling and a Master Promissory Note.  These loans do have an origination fee that changes every year, but usually it stays between 1-2% of the amount of the loan.  

Parent PLUS Loan
Direct loans are loans that parents can
borrow for their student’s college education expenses. This loan does requirea credit check If the parent is denied the student will be eligible for additional unsubsidized loans up to $5000 per year.  If the parent is accepted and wants to borrow the loan they will need to complete a Parent PLUS Master Promissory Note.  The parent can borrow up to the cost of attendance so their loan often pays for books and additional expenses.  This loan has a higher interest rate typically between 7-8 % and the origination fee ranges between 4-5%.  The repayment options are what makes this payment option attractive.  The parents can start paying right away, wait until the student is no longer enrolled, or 6 months after the student has graduated.  

Private Loans 

Private loans are administered through private banks or credit unions.  Private loans typically are in the student’s name, but the student will need a cosigner.  A cosigner can be anyone that has good credit and income to debt ratio. Private loan options are competitive because they are competing against each other and the government for the student’s business.  If you decide to pursue this payment option please read the fine print. Each private loan has different repayment options, interest rates, and terms and conditions.  The university will need to certify this loan in order for the money to be paid.  You should start applying for a private loan at least two weeks before the student bill is due.

529 Plans, Trust Payments, Prepaid Tuition 

These payment options are ones that you have planned to use probably for 15 years or more.  You will need to work with the company where you have your money invested to find out the “rules” to access the money.  They will usually want an enrollment letter and a copy of the student bill.  You will want to plan to start this process close to a month before the student bill is due because the third party has an approval process and then has to disburse the funds. Sometimes these entities do not disburse funds until enrollment verification, which is a couple of weeks after school has started.  In that case make sure you notify the student accounts office so that an estimate can be placed on the student account (you will have to provide documentation).  If they will not put an estimate on the student account, you may have to pay out of pocket until the funds are received by the school.    

VA Benefits 

You may be using your own VA Benefits or you may be a dependent of a veteran, but this process can be trying at best.  You need to find out who your schools VA Certifying Official is and get to know that person really well. They should walk you through the process no matter what chapter you are using.  If that person is not in the student accounts office then also try to connect with the student accounts office to let them know you will be paying with VA benefits.     

Typically, schools require a plan to pay for your student bill before attending classes. Schools need to know you are serious about attending their institution and use this information to plan for a space on-campus for you. 

We hope you find this information helpful. Please leave a comment below. We will be happy to answer any questions you may have about these payment options.  

Can you think of other payment options?