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Saving for your children's education requires a long-term plan. And, like saving for retirement, the earlier you start your plan the better. Use this calculator to help develop or fine-tune your education savings plan. Click the "View Report" button for a detailed look at the results.

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Everything You Should Know About Saving for College

It's time to start thinking about college. In most high schools, 11th and 12th-grade students get college preparation courses and coaching. Your family may have started a college fund, but you are most likely going to have to take out some student loans to cover what your savings don't. Research and studies have shown that over 60 percent of all students that graduate from college will begin their careers in student loan debt. The average rate for defaulting on these loans is over 11 percent. This can have a huge impact and potentially cripple a young person just out of school. This article will go over the average cost of both public and private colleges, as well as four years and two-year schools. We'll touch on the cost of in state and out of state tuition, and what makes up the average cost per semester. We'll talk about the different types of loans that are available and how to apply for those, as well as alternative programs to look into to avoid taking out so many loans.

Piggy Bank in front of bookshelves.

Comparing the Cost of College Options

The cost of your choice of college depends on several factors. If you are from out of state, tuition will be higher; a two-year program costs less than a four-year, and online courses are more expensive than in person.

Public Two Year College - In State

A public two-year college is going to be one of your most inexpensive options. If the college is in your state, you won't get hit with out of state fees and added costs. The average yearly cost for a public two-year college is $3,500 to $4,000. This price includes courses, books, and miscellaneous expenses. There is usually no on campus housing, so this reduces the cost.

Public Four Year College - In State

A public four-year college is less expensive, but there is room and board added on. Most four-year colleges require you to live on campus for at least the first two years out of the four. The average cost of a public four-year college is $20,000 per year. This cost includes books, food, room and board, and courses.

Public Two Year College - Out of State

If you're looking for a school that is in another state, be aware that the admissions price will be higher. Most two year colleges don't have a huge difference in their in state and out of state admissions price. Two-year colleges are competing for students, and most students choose to stay in their states to attend a two-year college.

Public Four Year College - Out of State

Public universities are funded by the taxpayers who live in the state's tax dollars. So it's only fair that out of state students aren't entitled to this lower rate. The price can be a little higher, or it can be almost double the in state student cost. It all depends on which university you plan to attend. On average, the out of state tuition is around $35,000 per year.

Private Two Year College

Private colleges are generally more expensive than your two or four-year public colleges. They can be more selective to which students they admit, and they can also have higher admission standards. The average cost for a private two-year college is $24,000 annually.

Private Four Year College

A private four-year college will cost around $38,000 per year. This expense covers room and board, meals, books, classes, and lab fees. Private colleges are found in every state, and there is usually a more rigorous application process. There also may be more costs associated with the admissions process.

What Factors Make up College Costs?

Several factors come into play when college costs are calculated. They could be things the college charges you for, as well as things they estimate that will be a personal cost to you like transportation.

  • Books. Books and supplies are another major expense colleges factor into tuition rates. There are used books available, but they go quickly, and you have to be sure you're buying the correct edition. A single book can cost around $300, and the average book cost per semester is around $1,100.
  • Housing. The cost of room and board or housing plays a significant role in driving up tuition costs. The college estimates how much students would be paying out if they lived off campus, and this figure can total over $10,000 per year.
  • Meals. Many colleges offer meal plans for their students. The cost of the program varies by both the school and the number of meals the student chooses per day. It averages out to $1,000 to $3,000 per semester.
  • Miscellaneous Fees. Did you know colleges average all of the various fees you might have while you attend? They add things like library usage charges, student government, athletic clubs and sports, musical instrument rental, and campus transportation.

Different Types of Student Loans

If you're beginning to look into student loans, the first thing you should do is shop around. There are many types of student loans available, and each one has their own sets of guidelines. This section will go over several different types of loans, along with how you apply for them and their eligibility requirements.

Parent PLUS Loan
Parent PLUS Loans are given to the parents of either undergrad or graduate students to help with college costs. Borrowers usually delay paying anything until the post-graduate six month grace period is up, and there is a low 7.9 percent interest rate attached. These loans are typically repaid over a period of ten years, and the interest is fixed. There is a four percent fee each time this loan is taken out as well. Unlike the other loans on the list, there is no maximum amount you can borrow with this loan, as long as it covers tuition costs.

Perkins Loans
A Perkins Loan is a Federal loan that is offered to students who have shown to have larger than average financial hardships. These loans are all subsidized, and this means you pay nothing until you graduate, and there is a nine month grace period after that as well. They have a fixed interest rate of around 5 percent and a ten-year repayment plan. As an undergraduate, you may only borrow $5,500 per year, and not exceed the $27,500 cap. A graduate can borrow up to $8,000 per year, and combined you can't borrow more than $60,000. This loan is also one of the most famous for loan forgiveness. If you're having trouble paying it back and meet certain criteria, your debt may be wiped out.

Stafford Loans
One of the most common types of loan is the Stafford Loan Program. The funding from these loans come straight from the Federal Government from the Federal Direct Student Loan Program. The Stafford Loan program is divided into two main areas: Subsidized Stafford Loan, and Unsubsidized Stafford Loans.

  • Subsidized Stafford Loan. If you have a Subsidized Stafford Loan, you won't make any payments on it until you're out of school for six months. The government will pay your interest rates while you're in school, and the typical interest rate is 3.76 percent. It is a tiered loan program by grade. First-year students can borrow $3,500 and below, second-year students can borrow $4,500 and below, and third and fourth-year students can borrow $5,500 and below each year. There is a cap on the amount you can borrow, and that is set at $23,000. To be eligible, you have to have a financial hardship, and your family can't have a combined income over $50,000 per year.
  • Unsubsidized Stafford Loan. If you choose an Unsubsidized Stafford Loan, you are responsible for making each interest payment while you are still in school. The interest rate maxes out at 3.76 percent, and actual loan payments are postponed until after you graduate. Any student can use apple and be eligible for this loan program, and the loans range from $5,500 up to $12,500. If you are financially independent, you may qualify for a loan on the higher end of the spectrum.

Applying for Student Loans & Tools to Help With This Process

As you begin to apply for loans to assist you with your college tuition costs, some tools and applications will guide you through this process.

FAFSA. The biggest tool you'll have to help you in the application process is the FAFSA or Federal Application for Student Aid. This is how you will apply for any of the loans that are listed above, and there is a lot of helpful information on the website like important deadlines and a college cost sheet. To begin the process of filling out this form, you will need documents from the adults of the household that shows their combined annual income, along with their full names and social security numbers. You will also need current addresses and phone numbers, as well as the school code you would like the aid sent too. The application process will guide you step by step, and once you submit it, you will receive a letter in the mail asking you to accept the loan amounts, along with how much your school will cost. The total will be applied to your tuition costs, and anything left over will be deposited in your bank account for extra expenses you may run into.

College Savings Calculator. The second tool that will help you estimate costs for college is the college savings calculator at the top of this page. This calculator is for parents who want to plan for a college savings fund for their children, and the earlier they start doing this, the better off they will be. You can add in any relevant information like your child's current age, the amount you plan to deposit monthly, and costs of tuition with inflation. This calculator will tell you how much you should be putting away each month to cover as much of the tuition costs as possible.

Options for Paying Your Loans Back

Once you graduate, you realize that all of those loans you took out have separate payments. This can make it very difficult to pay each of them on time and keep track of what amount you owe on what loan. There are options to streamline this process, and they are listed below.
  • Loan Consolidation. Loan consolidation is an option you should apply right after you graduate. This program takes each of your loans and puts them together for one monthly payment. You will pay a little on each loan every month, and it is usually spread out over a period of ten years. Your interest rate will stay around the same because they take the average interest of all the loans to get your new interest rate. If you do this with the Parent PLUS loan, you will be acknowledging that you're taking over the debt, and you parents won't be liable if you default on it.
  • Loan Deferment or Forbearance. Loan deferment or forbearance is another option to look into if you're having trouble making your monthly payments. These deferments can be for any student who is having a temporary hardship or extenuating circumstances that are making it difficult to keep up with payments. You will have to submit an application each year with proof of your income. You can only defer payments for three years; then you'll have to look into repayment plans.
  • Loan Forgiveness. If you find yourself having difficulty paying back your loans, loan forgiveness may be an option to look into. Most of the programs require that you have made at least 120 payments on time to be eligible. Certain service jobs like active military, teaching, and nursing are eligible for this program as well. This list offers a complete loan forgiveness program options, and you can click on any one to read more and learn how to apply. Almost all of them have different eligibility criteria, so be sure to read them carefully before you apply.
  • Repayment Plans. If you are having a temporary hardship, there are multiple repayment plans available. You can apply for an income driven plan, where your loan amount will be based on your current income. The standard repayment plan means you'll pay the same amount over a ten-year span. Finally, the extended repayment plan means you'll make lower monthly payments, but it'll take longer to pay your loans off. You must re-apply for these each year, and they can help get you a manageable plan.

What Happens if You Don't Pay Back Your Student Loans?

The average student who attends a four-year university will graduate with just over $30,000 in student loan debt, and they will carry this debt for at least the next ten years. This debt can jump to over $37,000 if a student takes longer than normal to graduate. This debt can be crippling if it is not managed correctly. If you start getting behind, it is a good idea to contact your lender immediately so they can help you figure out a plan to help you. If you let it go, it could end in wage garnishment, and they could take your tax refund come tax time.

If you decide you can't make your payments and just let them go, you'll be in danger of defaulting on the loans. As of 2017, one in six student loan borrowers has defaulted on their loans, and not made a payment in over nine months. If your loans go into default, it can be tough to pay them off. Remember, interest is adding on the entire time, whether you're paying on them or not. This will make your overall debt larger, and you'll be paying it back over a longer period. Your credit score will also take a hit. Each student loan you have reports to all three major credit bureaus, and if you miss payments or fall behind, this will show up on your credit report. If lenders see this, they will be less likely to give you a line of credit like a loan or even a mortgage.

Taxes & Wage Garnishment
Almost all of your student loans come from the Federal Government, and this means they have the ability to interfere with your tax refund and wages. They may impose a wage garnishment if you don't make an effort to get current with your loans. They could also take any Federal tax refund you might be anticipating come tax season.

How Do You Fix Your Loans if You Fall Behind?

The first thing you should do is call the lender your loan came through. They will be able to look in your records and suggest options to help you.

  • Loan Rehabilitation. If you can make the payments on time each month, loan rehabilitation could be an option for you. You call the lender the student loan is through and request to start the rehabilitation process. You will have to make the next ten monthly payments on time, and if you do, they'll wipe out all of your missed payment history and return your loan to good standing. If you miss one of these payments, you're back to square one. Loan rehabilitation can only be attempted once, so make sure you can make the payments.
  • Make Payments. Even if you fall behind, you should start applying for payments on any existing balances. This won't make everything go away, but it'll stop any more missed payments from showing up on your credit report. This could also stop any collection process that has started against you. Your lender will see you're trying, and as long as you keep it up each month, no further action will be taken against you.

How Can You Avoid Taking Out so Many Student Loans?

After reading everything above, if the though of taking out multiple loans scares you, there other options available to lower your tuition costs. The most obvious one is your parent's setting up a college fund to assist with the tuition costs. You can also work on campus, and there are programs where you work and your wages go straight to your tuition instead of you getting a check.

Residential Advisor. One of the biggest costs for college is room and board. There is a program you can sign up for where you act as your floor's RA or Residential Advisor. You are the person people come to with disputes or issues relating to their housing situation. You also monitor for illegal substances and bad behavior. There is an extensive training process, and you're expected to be on hand a lot, but the payoff is worth it. You get discounted or free room and board, along with experience and a boost to your resume.

Grants and Scholarships. If you don't want to take out many loans, look into scholarship and grant options. You won't have to pay these back, and you want to qualify for them early. Most of these need an essay on why they should choose you, along with certain criteria you must meet to be eligible. If you get a few of these, it will cut down on your student loan costs.

This article has gone over different types of student loans along with tools and tips for applying. It also touched on various repayment plans, and what to do if you get into trouble paying them back. We talked about grants, scholarships, and college positions that can help you cut the cost of your tuition, and graduate as debt free as possible. If you take the advice listed in this article and research on your own, you should be able to graduate college with minimal student loan debt.

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