Paying College Tabs As Loans Dry Up

Ray Martin Offers Advice To Help Students And Their Families In Current Financial Climate

(CBS) 

Call Financial Aid Office: Your school should be your first stop. If you suddenly find that your promised loans aren't going to come through, or your family's financial situation has changed, alert your school. The financial aid office will likely have advice about where to turn next. The National Association of Student Financial Aid Administrators and other experts agree that schools are going to be more accommodating than ever this year. They will work with you if there's a gap between when tuition is due and when your various loans come through.

Max Out Federal Aid: If you didn't apply for federal student aid earlier in the year but now need the help, it's not too late to apply. Most schools do set deadlines for applying -- you'll often see deadlines as early as March in order to receive loans in the fall -- but that's simply to make the financial aid process run more smoothly at the school and for lenders; the deadline isn't set by Washington. You can still qualify for loans now, and you'll typically know within three business days how much federal money you're eligible to borrow. It's also important to know that you don't need to pass a credit check in order to qualify for a federal student loan, and the amount students can receive recently was increased by $2,000 a year. Federal loans will always be a better deal than private student loans -- interest rates will always be lower -- so take full advantage of these loans before moving on to private loans.

Consider a "PLUS" Loan: Federal student loans are in a student's name, but parents can also borrow money through government programs to finance a child's schooling. Parent Loans for Undergraduate Students have lower interest rates than most private loans, and are easier to obtain.

Shop Around for Private Loans: If you need to turn to private loans and you're scrambling for a loan right now, don't feel forced to accept any private loan that comes your direction. Keep in mind that, while it may not feel like it, there are still a lot of options out there. Interest rates, fees and credit requirements vary widely so, just as when shopping for a mortgage, it pays to explore different lenders. In addition to your school's financial aid office, there are a host of Web sites that help you sort through and compare various private loans.

Find a Co-Signer: If students need to turn to private lenders for loans, then try to get a co-signer for the loans. Often, students don't have an established credit history or they have low credit sores, resulting in high interest rates and extra fees. But interest rates on loans for which there is a co-signer with good credit can be much lower.

Don't Use Credit Cards: Whatever you do, Martin cautions, don't surrender and put your college costs on your credit card. You'll saddle yourself with a LOT of high-interest debt, and will likely be paying it back for years to come.

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Before borrowing money, families should employ numerous cash flow, tax and investment strategies to reduce the cost of a college education. These strategies will significantly reduce the amount of loans needed.

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