Consumer Tips: Paying for College

If you are planning to go to college, you have to choose a school that's right for you, develop a plan to pay for school, compare financial aid packages, and consider how to repay any student loans. Visit the Department of Education's website (Link opens in a new windowhttps://collegescorecard.ed.gov) to determine the quality of a school by viewing cost data and students' graduation rates, ability to repay loans, and earnings after graduation.

You should also check that the school is accredited by a nationally recognized accrediting agency. Accreditation ensures that education programs meet acceptable levels of quality. Start your search for an accredited schools at Link opens in a new windowhttps://ope.ed.gov/dapip/#/home.

Paying for College

Many state governments have created 529 plans that help families save for their child's education. These plans allow you to save, while the earnings grow tax-free. There are two main types: prepaid tuition plans and college savings plans. Prepaid plans allow you to pay for your child's college tuition based on today's costs, and then the plans pay out at the future (higher) cost once it's time to enroll in college. College savings plans allow you to invest money in several investment funds, ranging in risk level, to pay for college education. There may also be tax benefits, such as credit and deductions, when you contribute to some college savings plans. Visit Link opens in a new windowhttps://www.irs.gov/newsroom/tax-benefits-for-education-information-center for more information.

Resources

• The U.S. Department of Education's website, Link opens in a new windowhttps://studentaid.gov, provides information on preparing for and funding education beyond high school, with details on federal aid programs.
• The Consumer Financial Protection Bureau (CFPB) offers tools and calculators that allow you to compare financial aid offers, and interactive wizards to create a plan for repaying student loans, at Link opens in a new windowhttps://www.consumerfinance.gov/paying-for-college.
• The website Link opens in a new windowhttps://finaid.org offers calculators to help you determine how much school will cost, how much you need to save, and how much aid you will need.
• The Department of Education's checklists at Link opens in a new windowhttps://studentaid.ed.gov/sa/prepare-for-college/checklists#checklists explain how to apply for financial aid and college.
• The National Association of Student Financial Aid Administrators (NASFAA) provides advice, tips, and information on financing your education at Link opens in a new windowwww.nasfaa.org.

Financial Aid

Student financial aid is available from a variety of sources, including the federal government, individual states, colleges and universities, and other public and private agencies and organizations. The four basic types of college aid are as follows:

• Grants—A grant is gift aid that does not have to be repaid and is generally awarded according to financial need.
• Work-Study—The Federal Work-Study (FWS) Program is a federally funded source of financial assistance used to offset financial education costs. Students who qualify earn money by working while attending school. This money does not have to be repaid.
• Scholarships—Funds are offered by the school, local or community organizations, private institutions, and trusts. Scholarships do not have to be repaid and are generally awarded based on specific criteria.
• Loans—Funds are borrowed and must be repaid with interest. As a general rule, federal student loans have more favorable terms and lower interest rates than traditional consumer loans.

Applying for Aid

You must complete and submit a Free Application for Federal Student Aid (FAFSA) to apply for federal student aid. FAFSA on the Web is the quickest and easiest method of applying. Go to Link opens in a new windowhttps://studentaid.gov/h/apply-for-aid/fafsa to apply.

You can hire a college aid planner, a professional to guide you through the FAFSA process. This planner's role is to improve your application so you can qualify for the most financial aid. If you use this service, remember that they are not certified like financial planners or certified public accountants. If you only need a small amount of help, contact your school, counselor, or public library, for free. If the planner charges fees, but doesn't deliver on his or her promises, it could be a scam. Learn more about financial aid scams at Link opens in a new windowhttps://studentaid.gov/resources/scams.

Federal Student Aid Information Center

The Federal Student Aid Information Center (FSAIC) can answer your federal student financial aid questions and give you all the help you need for free. You can find out whether your FAFSA has been processed and to request a copy of your Student Aid Report (SAR). FSAIC contact information can be found here: Link opens in a new windowhttps://studentaid.gov/help-center/contact.

Federal Loan Program Repayment Information

• Public Service Loan Forgiveness Program—This offers forgiveness for outstanding federal loans for individuals working full time in public service jobs.
• Income-Based Repayment Plan—This helps to make repaying education loans more affordable for low-income borrowers.

For more information on these programs as well as other repayment options, visit these resources:

• U.S. Department of Education, Federal Student Aid (Link opens in a new windowhttps://studentaid.gov/h/manage-loans)
• NASFAA (Link opens in a new windowwww.nasfaa.org)
• CFPB's Know Your Options repayment tool (Link opens in a new windowhttps://www.consumerfinance.gov/paying-for-college/repay-student-debt)

Comparing Student Loans

Not all student loans are the same, especially federal and private loans. Federal student loans are offered through the U.S. Department of Education. Private loans are offered by banks, credit unions, or schools. Federal loans tend to offer loans at lower interest rates than private loans. While federal loans don't require you to have a cosigner, many private loans make this a requirement. Visit Link opens in a new windowhttps://studentaid.gov/understand-aid/types/loans/federal-vs-private to learn more about the difference between these loans.

Before you get a loan, determine how much money you need to borrow, and only borrow that amount. When you get the loan, be clear about payment terms and what type of loan you have. Follow these tips once your student loan becomes due:

• Maintain accurate records of your loan, including the loan agreement, interest rates, and account numbers.
• Track your loans to stay updated on how much you owe.
• Make certain that the loan servicer has your current contact and bank account information (if payments are withdrawn automatically).

Use the CFPB's tools at Link opens in a new windowhttps://www.consumerfinance.gov/paying-for-college to compare financial aid offers.

Receiving Student Aid

Your school must make your federal student aid available to you, without charging excessive fees to access the funds. You have the right to have the money deposited into a bank account that you already have, without any penalty. A college must provide a list of the options for receiving your financial aid, without showing bias to any option. Your school can't require you to open an account with a specific bank or a prepaid card to receive your money.

Defaulting on Student Loans

A default means you failed to make scheduled payments on a loan. Your loan becomes delinquent the first day after you miss a payment. However, the loan is not in default until 270 days have passed without a payment. The consequences of default can include the following:

• The entire unpaid balance of your loan and any interest is immediately due and payable.
• Your loan account is assigned to a collection agency.
• The loan will be reported as delinquent to credit bureaus, damaging your credit rating.
• Your federal and state taxes may be withheld through a tax offset. This means that the Internal Revenue Service can take your federal and state tax refund to collect on your defaulted student loan debt.
• Your employer can withhold money from your pay and send the money to the government. This process is called wage garnishment.

Contact your loan servicer immediately if you are having difficulty making your payments. The servicer may be able to help by changing your repayment plan, switching the due date, getting a deferment or forbearance, or consolidating your student loans. Visit Link opens in a new windowhttps://studentaid.gov/manage-loans/default for information to avoid defaulting on your student loan.