Let’s be honest, the rising cost of college is daunting. But don’t let that discourage you from reaching for your educational dreams. A college education opens the door to new opportunities while teaching valuable life skills. If you see college in your future, it’s beneficial to understand your funding options.
Many students turn to loans to finance their college expenses. But what many people don’t realize is how long it takes to pay back those loans. The repayment track for a federal student loan is 10 years. But in reality, research shows that it takes 21 years on average for students in the U.S. to repay their loans.
That’s a big chunk of time.
Not to mention, compounding interest rates can increase costs for a graduate the longer they take to repay their loan. If interest rates rise, students may owe much more than they originally anticipated. Studies showed that 71 percent of students graduated with student loan debt.
So then the questions stands, what is the best way to pay for college?
The first step is to apply for every scholarship you may be qualified for. There’s a scholarship for everything (even being tall).
Next, apply to see if you’re eligible for federal grants, loans, and work-study programs by submitting your Free Application for Federal Student Aid (FAFSA). You may be surprised by the savings you find in your financial aid package.
If you’ve exhausted those options but still need help paying for college, try using a combination of student loans and crowdfunding. Using the two in tandem can minimize your financial stress. Crowdfunding will help lower your loan costs and shave down the amount of time it takes to pay them back. Plus, it’s a quick and easy way for family and friends to contribute towards your future.
Federal Student Loans
These are funded by the federal government. Students can apply for free through FAFSA. These loans offer a type of protection that private loans don’t. For instance they offer a fixed interest rate and repayment plans based on income. There are four types:
Direct Subsidized Loans
Also known as Stafford Loans, this type of loan is offered to undergraduate students who have financial need.
Pros and Cons
The U.S. Department of Education pays the interest rate while you’re in school and for the six months following graduation, referred to as a grace period. However, this option is only offered to students who demonstrate financial need.
The amount you’re eligible to borrow is determined by your school and can’t go beyond your financial need.
Direct Unsubsidized Loans
Also known as Direct Stafford Loans, these loans are available for both graduate and undergraduate students. To apply, you must be the parent or spouse of the student.
Pros and Cons
These loans aren’t based on financial need. But you’re e always responsible for paying the interest rate.
The loan amount is determined by your cost of attendance as well as the other types of financial aid you receive.
Direct PLUS Loans
You must meet the basic eligibility criteria for federal student aid programs and you cannot have an adverse credit history.
Pros and Cons
Parents can help pay for their child’s college with this option, which also offers flexible repayment options. However there’s no grace period for repaying the loan.
You may be eligible for a loan that equates to the cost of attendance, but minus other types of financial aid you received.
Federal Perkins Loans
Undergraduate, graduate and even professional students who demonstrate a noteworthy financial need can apply for this loan.
Pros and Cons
These tend to have lower interest rates. Sadly not all schools take part in this program.
This will depend on your school’s fund availability as well as your financial need.
Private Student Loans
These are funded by lenders including private organizations, colleges, banks, and state agencies. They offer a choice between a fixed or variable-rate. Variable-rates usually start out small, but can fluctuate with age. Picking a fixed rate may mean higher monthly payments, but you can rest assured the rate will never increase. Students can be caught off-guard when interest rates rise and they can no longer afford their monthly payments, making it easier for graduates to fall into debt.
Eligibility for private student loans can depend on your year in school, location, income, whether you’re an undergraduate or graduate, and you or your co-signer’s credit.
There are several different types of private loans out there. You can find libraries full of private student loans with a quick Google search. Take the time to browse through different loan options to identify the lowest interest rates.
Other Things To Consider When Applying for a Private Loan:
- Potential hidden fees
- Defer capabilities
- Refinancing options
- Borrower rewards
- Grace period before repayment begins
What Is Crowdfunding?
Crowdfunding is a way to find support during a time of need. It’s a way to raise funds from the masses, whether that comes from family, neighbors, or strangers. It enables anyone to create a campaign that summarizes their story and financial needs.
Crowdfunding at Any Stage of Your College Journey
With recent studies showing student debt delinquency rates on the rise, it’s no wonder people are taking matters into their own hands with tools like crowdfunding. Whether you’re just starting to apply to schools or you’ve already turned the tassel on your graduation cap, crowdfunding can help.
Crowdfunding can help cover expenses when financial aid or scholarships may fall short. Below is a list of college expenses that crowdfunding can help at every stage.
- SAT or ACT tests fees
- SAT or ACT tutors
- SAT or ACT score submission fee
- Application fees
- Pre-college programs
- Studying abroad
- Greek life
- Repaying student loans
- You never have to repay the funds
The beauty of crowdfunding is that you’re being gifted free money to pursue your educational dreams. So unlike student loans, you never have to pay your supporters back. Friends, family, and strangers chose to give to your college fund because they want to see you succeed. So instead of worrying about rising interest rates, you can focus your energy on doing your best in school.
- You can make a name for yourself
A successful crowdfunding campaign uses networking to spread awareness. If you write a blog or are active on social media you may be able to create some buzz around yourself. Your campaign can boost your online presence, which may come in handy later when seeking employment post-grad.
- Minimize your chance of falling deeper into debt
Currently students in the U.S. owe a combined $1.4 trillion in loans spread between 44 million borrowers. Student loans add to the risk of pushing someone deeper into debt if they’re unable to keep up with their payments after graduation. With crowdfunding there are no interest rates to worry about. There is no black hole of debt looming above.
Potential Crowdfunding Con
- It isn’t easy to ask for help
Some people may feel that asking for money highlights their vulnerabilities. And while it can be intimidating to publicly ask for help, the reward is a fully funded college education. And who knows, you may garner attention from strangers looking to help a dedicated student. Altruistic celebrities like Chrissy Teigen have been to known to donate to crowdfunding campaigns for education.
Picking Your Platform
Before you start crowdfunding, you need to find a platform that works for your needs. While there are several platforms, take time to understand their features before you pick. Important features to look for are support and platform fees.
Most platforms offer integrated social media sharing, photos and videos, and a campaign description. Keep in mind that every platform faces payment processing fees, usually around 2.9% plus $0.30 per transaction.
Support: 5-minute support
Platform Fee: 5 percent per transaction
Support: Live chat coaching and support
Platform Fee: No fees
Support: Email support
Platform Fee: 5 percent per transaction
Now that you have a better idea of how you can pay for your education, it’s time to take action. Start looking at your loan options and kick off your crowdfunding campaign to achieve your dreams.
Paige Kutilek is an associate content manager at YouCaring. Her writing is focused on the crowdfunding industry and other related topics. She strives to create content that helps people, especially during times of hardship.