What do I need to know about financing a child's college education?
After you have estimated college expenses in the College Expenses dialog, examine your cash flow for the years your child will be attending college. If your cash flow is negative, you will probably need to adjust your plan to meet the financial demands of this period. Here are some ways to do this:
Save more (and earlier)
Increasing your taxable savings will provide additional funds to meet the needs of college. If your children are also saving for college, you could add their contribution as an income during the period.
Look into financial aid
Financial aid is money that is given, lent, or paid to you so you can pay for college expenses. Financial aid is available from private sources, colleges and universities, or state and federal government agencies. To find out more about financial aid:
• Explore non-loan forms of financial aid, including Gift Aid (grants and scholarships), Work Study, and Military options (including ROTC and the service academies).
• Look into loans (including education loans and other types of loans), installment payment plans, and prepaid tuition plans.
How to apply for financial aid for college expenses
To ensure that you're considered for federal, state, and institutional (college-based) aid, follow these guidelines:
• Ask your high school guidance office for a Free Application for Federal Student Aid (FAFSA). To get more information about this application, see the Sallie Mae website. Review the Financial Aid section.
• Check over your completed FAFSA very carefully, include all the required signatures, and submit it as soon as you can after January 1.
• Contact the financial aid office at the colleges that you are interested in, and request information on the available financial aid and the application process.
• Financial aid administrators at the colleges where you are accepted will verify the information from your FAFSA, determine your aid eligibility, and then send you a financial aid award letter. This letter will state the amount of aid for which you are eligible and the types of aid (grants, loans, and/or work study) that make up your aid package.
• Remember that you must reapply for aid each year that you are in school or when you transfer to a different college.
General information about loans
The information below was provided to Quicken users by the Student Loan Marketing Association (Sallie Mae ).
Education loans are made to students and/or parents, and must be repaid, usually with interest. You may be eligible to borrow for college from some of the following sources:
• Perkins loans are relatively low-interest federal loans made through colleges to students with financial need.
• Stafford loans are available to both graduate and undergraduate students.
• PLUS loans (Parent Loan for Undergraduate Students) are available to parents of undergraduate students. This is not a need-based loan, so a parent can qualify regardless of income.
• HEAL loans are available to graduate health professions students. They are made and administered by banks and backed by the U.S. Department of Health and Human Services.
• HPSL loans (Health Professions Student Loans) are relatively low-interest loans for graduate health professions students with exceptional financial need.
• Private education loans are also available from a variety of sources. Special programs are available, for example, for graduate students in law, business, and medicine.
• Many other types of loans, such as home equity and personal loans, can be used to pay for college.
For more information about educational loans, see the Sallie Mae website. Review the federal student loans section.
This information is subject to change without notice. Sallie Mae wants this information to be as up-to-date and accurate as possible, but neither Sallie Mae nor Quicken Investment Services, Inc. can guarantee or warrant that it is error free. Sallie Mae also reserves the right to change its program benefits and services at any time without notice.
Take out a loan to meet the cash flow shortfall for each of the years you need assistance
Since each year may have different requirements, you can set up different loans for each year that your child is in college. You can adjust the repayment schedules of the various loans individually or consolidate the loans into one loan once college is over. In this way, you keep your borrowing to what you actually need, and you can examine how the repayment will affect your lifestyle. You enter loans in the Loan Accounts or Planned Loans dialog.
One big loan vs. several smaller loans
You could take out one loan to cover the entire cost of college. This may seem like the easiest approach. However, you will only use funds as bills are sent (or phone calls from the dorm are answered). If you borrow the funds all at once, you will be paying interest on the total from the first day of college. Borrowing in stages reduces your total interest cost and more closely approximates how you will actually meet the financial need.
Rolling those loans into one loan at the end of college allows you to control your repayment more effectively.
If you do decide to take out just one loan at the beginning of college, take the money that you won't spend that year and put it to work for you.