August 14, 2023

What to Do Before Applying for a Student Loan

Every student and family should know what FAFSA stands for before applying for any student loans. For the record, it’s an acronym for Free Application for Student Aid and is the starting point for all financial aid decisions.

The U.S. Department of Education (DOE) gives you an indication of just how important FAFSA is when it brags on one of its website pages that: “We provide more than $150 billion in grants, loans, and work-study funds each year, but you have to complete the FAFSA to see if you can get any of that money.”

So what is FAFSA? It stands for “Free Application for Student Aid.” The information you provide on a FAFSA form helps the DOE determine your unmet financial needs for college and what they can do to address them with federal money. Many states and colleges also use the information from FAFSA to award the grants or student loans they offer.

There are other situations students and parents can investigate before signing up for a loan – cost of in-state schools vs. out–of-state; public vs. private; stay-at-home vs. going away; interest rates for various student loans – but nothing is going to happen until you fill out the FAFSA.

If you want a ballpark number, the College Board estimates that a moderate budget for in-state schools in 2017 will be $24,610 and $49,320 for a private college, depending on the school and its location.

But the big thing is to jump on the FAFSA as early as possible. Most of the information requested should be on your tax filings. Use that as a guide and where necessary, estimate income or costs. Don’t forget: $150 billion in grants, loans and work study funds is at stake.

Alternatives to Student Loans

There is a simple, increasingly popular way to graduate from college without an overwhelming amount of student loan debt: live at home while earning your four-year degree.

The savings can be staggering. A Bachelor of Arts degree could be had for under $50,000!

That would mean two years at a local community college where the average tuition/fees ($3,520), books ($1,390), transportation ($1,760) and other expenses ($2,270) add up to $8,940 a year. Spend the next wo years at a local state university where average tuition and fees ($9,650), books ($1,250), transportation ($1,160) and other expenses ($2,110) total $14,170 per year.

As long as Mom and Dad supply room and board (four-year savings of $37,000), your degree runs approximately $46,220.

If you don’t live at home, you can still cut costs by finding a roommate to share expenses; reduce personal spending; take extra classes so you graduate in three years; or live away from home for two years and spend two at home.

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