Navigating the big decisions together

Many families falsely perceive or simply do not realize that college financing options do not end with the Free Application for Federal Student Aid (FAFSA) form. I believe it is more important than ever for families to be aware of college financing options in the initial planning stages since the burden of unmet costs is shifting to students and parents in the form of loans. This is one area that many parents struggle with the most, because when they attended college, a majority were able to finance a large portion of their education without having their parents take out huge loan amounts.

Presently, many private colleges in the United States are over $50,000 a year for their entire cost of attendance – tuition, fees, books, room and board. The skyrocketing cost of attendance coupled with the reduction of federal “need based” financial aid has parents shouldering the majority of the college bill. The desire to be fiscally responsible with loan amounts can be complicated for many families, especially for those who have other children approaching the college years.

Unfortunately, many parents with good credit history only consider a Federal Direct PLUS Loan – commonly known as the Parent PLUS Loan – without considering or comparing other loan options to cover annual college costs. While the Federal Direct PLUS Loan is considered safe with its flexible repayment options and a fixed interest rate, it also has one of the highest interest rates of all federal loans.

Parents are now encountering a significantly reduced Federal Direct PLUS Loan interest rate of 5.30% for the 2020-2021 academic year (the interest rate was 7.08 for 2019-2020, 7.6% for 2018-2019, 7.0% for 2017-2018, and 6.31% for 2016-2017) with a current loan origination fee of 4.248% proportionally deducted from each loan disbursement. What does proportionally deducted from each loan disbursement mean? It means with federal loans, slightly more money will have to be borrowed than originally anticipated to cover a specific dollar amount. For many families this is equivalent to a surprise tuition increase before classes even start in the freshman fall semester!

College costs can quickly expand each year from increased loan rates amounts to increased tuition rates. Families that do not plan for these potential increases risk having affordability issues in the later years of a student’s college education.

Please contact Campus to Career Crossroads if you are concerned about financing college as doubt, confusion, and regret should not be part of the college journey. Call today for your free consultation.

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