Students and parents, grab your wallets! As if spiraling college costs were not enough, interest rates on federal student loans are set to rise by 0.8% for the 2014-2015 academic year. Stafford loans will be rising to 4.66% (fixed) for undergraduates and 6.21% for graduates, and Direct Plus loans will hit 7.21%.
Compromise legislation in 2013 indexed the student loan rates to 10-year Treasury notes, and the recent auction produced the current rise in rates. Given that 10-year Treasury rates are unusually low in historical context, it seems likely that both the costs of college and the costs of borrowing will continue to rise each year.
Obviously, if you can save more for college during your earlier years, the less you will have to borrow. But what if college beckons, and you find yourself with considerably less money than you need? At this stage, how can you keep your college costs down? Here are a few ideas:
- Apply for Grants and Scholarships – People think of Pell Grants and athletic/academic scholarships and automatically assume they don't qualify for any assistance. However, there is a large variety of grants and scholarships out there, all of which fall into a rare category – free money.
Several websites can direct you to the various grants and scholarships available, as well as the qualifications involved. Keep in mind that there are also scholarships that are specific to a school or field of study, so be sure to contact the financial aid office of any school in which you are interested.
It is important that you file your Free Application for Student Federal Aid (FAFSA) form as soon as possible. Virtually all forms of financial aid use this baseline. Since some forms of aid are first-come, first-served and have limited funding, you must file FAFSA as soon as possible to avoid limiting your options.
Many scholarships are for limited amounts or times – but every little bit helps.
- Investigate Work-Study – Many excellent universities admit on a need-blind basis and try to accommodate some student financial needs through work-study programs. These programs are in the universities' best interest – they get useful labor and you get money that is partially reinvested in the university – and in some cases, they can be tailored to fit your schedule or field of study.
- Work or Military Programs – You may be able to find an employer that will pay for a portion of your schooling in return for a work commitment. The military is the most obvious example, but in some cases with technical fields, you may be able to show useful skills with an internship and parlay that into both a partial covering of your educational costs and a job waiting when you graduate – the ultimate win-win.
- Adjust College Options – If the gap is too large and cannot be overcome by any of the above steps, you may have to consider less expensive college options. Check into the transfer options for your preferred school; there may be options for you to take your basic classes at a less expensive institution or two-year program and then transfer to your preferred school for your degree program.
We hope that one of these options can help cut your college costs to the point where loans are not necessary, or at least less painful. If not, do the best you can with what you have – and root for the 10-year Treasury bond to fall for 2015.Find out quickly at what rate you can refinance your student loan.