PREPARE

Talk With Your Family and Others

Paying for a postsecondary education (college or career school) is an investment. It requires planning. It takes money. So talk with your family openly and early, don't wait until your senior year. You can also talk to a guidance counselor at your school; they often have helpful information about planning for a postsecondary education.

Suggestions

Find out which college expenses your family will cover and which ones will be your responsibility. College costs are not just tuition, room, and board. Other costs can include

Fees: Fees will depend on the school you're attending. This list can be obtained directly from the school. Fees include activity fees, parking decal fees, etc.

Books and school supplies: Books can be expensive. The national average at four-year private colleges in 2006–07 was about $1,000 a year. School supplies can include book bags, notebooks, pens, pencils, paper, folders, stapler, desk organizing system (trays, pen holder, etc.), computer paper, etc.

Equipment, room materials, and miscellaneous expenses: Equipment may include computer, printer, etc. Furnishings may include such items as reading lamps, microwave, refrigerator, sheets, towels, etc. Other expenses can include clothing, cell phone use, and entertainment.

Create a budget to maintain control of your financial situation, limit spending, and borrow wisely.

How do I meet the costs of college?

You and your family have the primary responsibility of paying for college through

scholarships,

qualified prepaid or 529 savings plans,

personal savings, and

money from summer work.

If these resources are not enough and you still need additional money, turn to

the federal government and

institutional and state aid.

Why the federal government? The federal government is the main provider of financial aid for college. Every year, students, and parents, receive more than $83 billion in aid. With all these funds available, applying for aid from the federal government is a good option.

Federal student aid from the federal government can be one of the following:

Grants: Free money that doesn't have to be repaid, except in some cases when you withdraw from school.

Work-study: You earn money to pay for your education.

Loans: You borrow money for school, which you must repay with interest.

This publication covers all facets relating to loans. Read Appendix A to become familiar with the types of federal student loans we're covering in this publication. For comprehensive and updated information on all of the federal student aid programs, including grants and work-study, visit Student Aid on the Web at: www.FederalStudentAid.ed.gov. You can also access Funding Education Beyond High School: The Guide to Federal Student Aid, an annual publication on federal student aid programs, at: www.FederalStudentAid.ed.gov/guide or order a copy by calling the Federal Student Aid Information Center toll-free at 1-800-4-FED-AID (1-800-433-3243). TTY users (for the hearing-impaired) can call 1-800-730-8913. Callers in locations without access to 1-800 numbers may call (319) 337-5665. (This is not a toll-free number).

As I prepare for college, can I find out now how much federal student aid I might get?

Yes. To get an early estimate of your federal student aid eligibility use FAFSA4casterSM. It's a free online tool to help students and families financially plan for college. Fill it out. The tool will instantly display the types of federal student aid you might receive. In addition to estimated award amounts for any federal grant programs, it gives you examples of award packages based on the scenarios you select. (See Appendix B for an example).When you're ready to apply for aid, FAFSA4caster will automatically move your information to your federal student aid application, FAFSA on the Web^SM (www.fafsa.ed.gov), thus reducing the time it takes for you to complete your application. You can access FAFSA4caster at www.FederalStudentAid.ed.gov (click on "FAFSA4caster").

Who can get federal student loans?

To be eligible for federal student aid, you must:

be a U.S. citizen or eligible noncitizen (for most programs) with a valid Social Security number;

be working toward a degree or certificate;

have a high school diploma or a General Educational Development (GED) certificate; pass an approved ability-to-benefit test (if you don't have a diploma or GED, a school can administer a test to determine whether you can benefit from the education offered at that school); meet other standards your state establishes that the U.S. Department of Education has approved; or complete a high school education in a home school setting approved under state law;

maintain satisfactory academic progress once in school.

These are general eligibility requirements. To get more detailed information, see Funding Education Beyond High School: The Guide to Federal Student Aid at www.FederalStudentAid.ed.gov/guide.

Many students are going to private lenders or online to look for financial aid. Always exhaust scholarships, grants, and federal student loans before turning to private or alternative student loans. Why? Private or alternative student loans often carry high and variable interest rates* and may require credit checks.

Avoid credit cards to pay for your education; interest rates on credit cards are very high and payments are due every month.

Do all schools participate in the federal loan program?

No. You need to contact your school to find out if it participates in the Federal Student Aid program.

Federal Perkins Loans* are offered and made through participating schools to undergraduate, graduate and professional degree students who demonstrate financial need. This loan is repaid to your school.

If your school participates in the Direct Loan Program ^SM,* the U.S. Department of Education is your lender.*

If your school participates in the Federal Family Education (FFEL ^SM)* Program, the federal government guarantees loans made under the FFEL* Program but you'll have to choose a lender* (either your own bank or financial institution or private lender that participates in the federal student aid program) to fund your loan.* You have the right to work with a lender of your choice and although some schools do have preferred lender lists* (list of banks and private lenders your school suggests) you're not limited to those options because, either way, the federal government backs your loan (see Appendix C).

RECAP—Funds to pay for your education should first come from:

Family resources, scholarships, and grants.

If you've exhausted those options, federal student loans are your next best option.

How are federal loans different from private loans?

While every student wants scholarships and grants, not everyone can cover the entire cost of college or career school through those options. Loans* can make your education possible and affordable.

Federal student loans and private loans are available to students to help pay for their education. Federal student loans have lower, fixed interest rates,* generous repayment plans,* no prepayment* penalties and no credit checks (except for PLUS Loans).

In contrast, private loans, which may be aggressively marketed to students through TV ads and other media, are substantially more expensive than federal student loans. They generally have higher, variable interest rates* that may substantially increase the total amount you repay. The interest rate you receive might depend on your credit* score. Private loans can also have prepayment* penalty fees.

If your bank or other private lender provides loans that are backed by the federal government, then they are participating in the FFEL* program. Be sure to ask if they do. Documents for a federal student loan will state somewhere on the form that it is a federal student loan. Some private student loan lenders have forms that look similar to the federal forms and might confuse some students (see Appendix D for tips on selecting lenders).