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Beyond Financial Aid and Scholarships

In addition to financial aid and scholarships, many students also turn to other sources of money such as student loans. Going to college is an investment in yourself, and often you will need to borrow some money to pay for this investment. Fortunately, there are many places that are willing to lend you money, often on very generous terms. We'll begin by looking at traditional student loans and then investigate a few lesser-known places to borrow money.

Student Loans

For most, a student loan will be the best and cheapest way to borrow money–unless of course you have the option of an interest-free loan from rich Aunt Emma. Since that's not an option for most, to qualify for a student loan, you need to apply for financial aid by filling out the Free Application for Federal Student Aid (FAFSA). When you submit the FAFSA, you not only check if you qualify for grant money, but you also establish your eligibility to receive government-backed, low-interest loans.

There are two types of student loans: subsidized and unsubsidized. For subsidized loans, the government pays the interest on your loan while you are in school so that interest doesn't accrue during that time. For unsubsidized loans, interest accrues while you are in school and you'll end up paying that interest once you start repayment. Whether a loan is subsidized or unsubsidized does not affect when you need to start paying back your loans, it only affects how much interest accrues while you are in school.

If you need to take out a student loan, the biggest choice you'll have to make is from whom to borrow the money. In fact, you'll probably find that you have a bunch of banks lining up to offer you money. While money is the same regardless of which bank you choose, you want to be a smart shopper by taking advantage of what are known as "borrower benefits."

As a borrower you can get valuable benefits for choosing one bank over another. Often these benefits are money-saving incentives for things such as making on-time payments, making payments via auto-debit or signing up for other services provided by the bank or loan servicer. These incentives may come in the form of partial interest rate reductions or even reductions to the principal balance of your outstanding loans. Usually, you won't need to change anything about the way you repay your loans when an incentive is applied to your account. The monthly payment amount remains the same, and you save money by repaying your loan balance more quickly.

So when you are trying to decide where to get your loan from, compare borrower benefits and then choose the loan that gives you the best benefits.

Private Loans

Not all student loans are government-backed student loans. In fact, you might find that private loans meet your needs. There are also loans that are not specifically designed to pay for college but that still make a lot of sense to use. Many banks and financial institutions offer special loans for students. These typically mirror the federal student loans. However, since they are private loans and not guaranteed by the government, their terms are set by the individual lenders. These loans can be extremely useful if you exhaust your federal sources of aid. Plus, since they are private loans you may apply for them at any time during the school year.

You apply for these loans directly with a lender. The interest rate will often be based on your credit history. The better your credit, the lower the interest rate. Most private loans allow you to defer the interest and principal payments until after you graduate. When selecting a private loan, compare the interest rates, repayment options, loan terms and borrower benefits.

Another option is if you own your home you may be able to use your home's equity to pay for college. Basically, a home equity loan allows you to use the equity in your home as collateral. You can borrow a lump sum and make monthly payments or you can establish a line of credit and borrow money as you need it.

When you establish a line of credit you only pay the interest on the amount of money that you actually borrow. Interest rates can either be fixed or variable depending on the loan.

Home equity loans have some major advantages over other types of consumer borrowing. For one, you can deduct interest from your taxes. Even more important may be the fact that borrowing what you need when you need it will not impact your assets as much as taking it all in one lump sum. This means that a home equity line of credit should have less of an impact on your ability to get financial aid. The lower impact that a home equity line of credit has on your assets combined with the tax deduction for interest paid makes this one of the better private loans to use to pay for college.

You can also make withdrawals from traditional IRAs, Roth IRAs and SIMPLE IRAs and avoid the 10 percent early withdrawal penalty if you use the funds for qualified educational expenses. You will still have to pay income tax on the amount. If you can stomach the risk, you can borrow money from your 401k plan. You will need to repay yourself the principal and interest within a five-year period. The risk is that if you lose your job you will have to repay the loan immediately or else face the double whammy of income tax and a penalty on the amount you borrowed.

Money from Your State

You may not like it when every time you buy something the state tacks on an extra 4 to 9 percent in sales tax. But you can take some consolation in the fact that you may get back some of these dollars through financial aid programs offered by your state. Every state has an agency or department that helps students pay for college. Many states also administer their own centralized financial aid and scholarship programs. Your state agency is a clearinghouse not only for information but also for actual dollars for college.

The first step is to find your state agency from the list maintained at the U.S. Department of Education website at http://studentaid.ed.gov. Click on the "Applying for Financial Aid" link to see a list of state higher education agencies. After finding your state's agency, visit their website as well as contact them directly by phone.

Whether you are surfing their website or speaking to a representative, the goal is to learn about all of the opportunities available to you. While every state operates differently and not all have the same programs, here is an overview of the most common programs and resources to inquire about:

State Scholarships and Grants. Many states award their own state scholarships and grants. Learn how the scholarship works, who is eligible and the deadlines. Depending on the state, there may be grants specifically for adults students, students who recently received their GED, vocational and technical school students and, of course, undergraduate and graduate school students. Some of these grants will be need-based while others will have no bearing on your financial situation. In some cases all you need to do is file an application to claim the money.

Private Scholarship List. As a clearinghouse for all things related to paying for college, many state agencies also maintain a list of private scholarships that are available. On some of the state websites we have found invaluable information including lists of all local civic groups that award scholarships.

State Loan Repayment Programs. Your state may sponsor valuable loan repayment programs. Some states, for example, will help you pay back your student loan if you enter specific career areas such as teaching, law enforcement, medicine, nursing or technology. As long as you work within those fields in the state after graduation, the state will help pay back your student loans.

State Work-Study. Like Federal Work-Study some states have their own work-study programs. These programs subsidize your salary as you work either on campus or for a government or nonprofit agency. Through work-study you can earn thousands of extra dollars while going to school.

Tuition Exchange. Some states or state university systems have agreements with other states or specific universities in other states to let each other's residents attend at in-state or heavily discounted rates. Paying in-state rates at another state's school can save thousands of dollars. Often these agreements are made with neighboring states.

Tuition Equalization Grants. These programs are designed to help shrink the difference in the cost of tuition between public and private universities. In Georgia, for example, residents who attend a more expensive private college can qualify to receive a tuition equalization grant of up to $1,425 per year.

Retraining Grants. Some state agencies also administer retraining programs for workers who have been laid off. These programs specifically target adults who intend to go back to school to learn a new trade or skill that will help them find employment. In Minnesota, for example, more than 1,300 laid off workers received training grants worth $4.3 million. The money was distributed through the Minnesota Jobs Skills Partnership Board. If you are going back to school to get a better job, inquire about retraining and displaced workers grants.

Disability Grants. Most states offer financial assistance to students who are disabled. The programs vary from state to state as do the qualifications for being classified as disabled. If you are disabled, begin investigating this option early since it can take several months or even a year to get certified for the appropriate program.

Senior Citizen Discounts. If you're over 60 in some states you not only get discounts on dinner but you also get to take college courses at a significant discount or even for free! Check with both your state agency as well as your university to find out what kind of discounts are available to senior citizens.

Other Funding Resources and Services. Be sure to ask about all of the other resources and services that your state offers. Some sponsor workshops to help families apply for financial aid while others have free publications on how to pay for college.

It's important to learn all that you can about the various programs offered by your state. Request all of the free information that they offer and take advantage of any resources such as lists of community scholarships that they provide.

Your College

Believe it or not, your college is your best ally when it comes to getting money. Sure they charge you for tuition, but they can also provide financial aid, scholarships and grants. Colleges receive money from alumni, community foundations and others to create scholarships for deserving students and staff various offices with knowledgeable administrators whose job is to help you figure out how to lower the sticker price of an education.

To make paying for college as painless as possible, take advantage of every opportunity and resource that your school offers. Following are the various services your college may offer to give you a road map for how to maximize their assistance.

Scholarships. Your college is one of the best places to find scholarships. Colleges give both need-based awards to students with low financial means as well as merit-based awards for everything from a student's interests to career goals. The challenge is that these scholarships are often spread throughout the university system. Many scholarships are administered by either the admission or financial aid office. Plus, your own department may have specific awards for students in your major. To complicate things, various campus groups—such as the school newspaper—may also award scholarships to their members. Make sure you don't leave any stone unturned when looking for resources. While searching for scholarships on campus, be sure to check these places:

  • Admission office>
  • Financial aid office>
  • Student development office>
  • Adult learning center>
  • Career center>
  • Library>
  • Alumni clubs>
  • Student clubs and organizations>
  • Foundations>

Transfer Scholarships. If you are transferring into a college from another school or community college, you may qualify for a guaranteed transfer scholarship. If this is an option, speak with the admission office at the colleges you are considering. Ask them what kind of financial aid package to expect and inquire about transfer scholarships.

Tuition Reciprocity Agreements. Some schools have formed relationships with neighboring states to offer their residents automatic in-state rates from the beginning. The University of Arkansas, for example, offers a Non-Resident Tuition Award for entering freshmen from neighboring states that include Texas, Mississippi, Louisiana, Kansas, Missouri, Oklahoma and Tennessee. This may save up to $6,000 a year in fees. If you want to attend a state college in a neighboring state, contact the admission office to find out if any such discount agreements are in effect.

Finally, you can always ask for more money from your college. Usually this means that you have submitted your financial aid application but the financial aid package is just not enough to allow you to pay the tuition bills. If you can present a sound case for why the college's financial aid offer is not sufficient, you may be able to convince the college to provide more assistance.

Your Employer

There are many reasons why a company would want to help you pay for your education. The obvious reason is if additional education helps you do a better job. By paying for a computer course, for example, your employer knows that you'll be able to use these newly-learned skills to improve your daily work and therefore become a more productive employee.

Another reason a company would be willing to pay for your education is that it is a benefit for recruiting better workers. If you are choosing between two similar jobs but one offers to pay for career development classes that you take while employed, you will probably accept their job offer.

The last reason why a company would offer to help pay for your education is retention. Since you only receive these benefits as an employee, you must continue to work for the company while you are also getting your schooling. Some companies may even make require an agreement to work for them for a certain number of years in order to receive education benefits. It's a trade. The company agrees to pay for your education, and you agree to work for them for a certain amount of time.

There is no standard education benefit, and companies are free to create whatever they feel is most useful to their employees as well as affordable for their bottom lines. In general, you will find that education benefits will fit into one of the following categories:

Tuition Assistance. The most common program from employers is tuition assistance or reimbursement. Companies are free to set their own policies on how these programs work. They may pay for a percentage of the tuition, up to a specific dollar amount or for a number of units. Most tuition assistance programs have a grade requirement, which means that if you earn lower than a "B" or "C," your company is not obligated to pay.

Companies usually pay only for courses that are deemed "work-related." Fortunately, "work-related" is a broad definition that is open for interpretation. You can often make a convincing case for courses that are not related directly to the job that you are doing now but that will help you develop professionally and learn new skills to advance in your career. Take a look at the people who are above you and see what skills and educational backgrounds they have. It makes perfect sense for you to take courses to learn those same skills so that you may be promoted to those positions in the future.

It's important that you talk to your human resources or personnel department and understand all of the rules to qualify for tuition assistance at your company. While many companies have tuition assistance, it is not always widely publicized. We've heard of more than one instance where an adult student spoke to their HR department only to be told they didn't have tuition assistance. Yet, when they asked their direct manager they found out that there was a program but it was run through their department manager and not HR. So be sure to inquire with both your HR department and your department manager.

Finally, be aware that some companies will withhold paying benefits for up to a year to make sure that you stay at your job. If you quit within a certain period after completing the courses, they may deduct what they have paid from your last paycheck. So don't think about taking advantage of tuition assistance if you plan on jumping ship soon.

Tuition Discounts. Your company may have a deal with schools in the area for discounts on certain classes or programs. For example, you may be able to take a computer training class for free or at a steep discount. Or, if you work for a college or university (even if you are a part-time employee) you may receive significant discounts on courses. Many colleges even allow their employees to get a complete education for free.

Free Professional Development Classes. These classes are scheduled by your company and are usually held on site or at a local school. They often cover material that is directly related to your job function. For example, if you work in sales, you may be able to attend a training course on negotiation skills.

Many adults find that these free training classes are not in their company's written employee policy. However, when they inquire with their managers they learn that they can take up to several thousand dollars worth of training classes. Usually your department manager is allocated a set budget at the beginning of the year for employee education. Since this budget changes with the fortunes of the company, it is not something that can be guaranteed to every employee. Managers usually have discretion over these funds and give them on a first come, first served basis. Ask your manager what kind of training money is available—and be sure to have an idea of what classes you want to take if funds are available.

Employer Scholarships. Many companies offer scholarships with no strings attached simply because you are an employee. These are great scholarships to win since you are competing against so few other people. Often the only requirement is that you are an employee. Even if you work part-time, you may find that you are eligible to win an employee scholarship.

Federal and State Retraining Programs

From the federal government there are several programs that you can take advantage of, particularly if you have been laid off or downsized. On the state level there is a much wider variety of resources that are open to more than recently displaced workers. Often the state will work with a network of charities, foundations, adult education centers and vocational and university systems to create a wide selection of services. Some of these services may be free while others are heavily discounted for those who qualify. Here are some places to start looking:

One Stop Career Center. These centers act as clearinghouses for information and programs offered by both the state and federal government. There's a directory of all of the One Stop Career Centers at www.servicelocator.org. You may also call toll-free, (877) US-2JOBS.

Department Of Labor Adult Training Programs. Most adult training programs are authorized by the Workforce Investment Act. This federal program aims to increase occupational skills, improve the quality of the workforce, reduce welfare dependency and enhance the productivity and competitiveness of the nation's economy. Most services are provided through One Stop Career Centers and include both occupational training and training in basic skills. There are also support services including assistance with transportation and childcare to enable an individual to participate in the program.

Educational Opportunity Centers. There are 139 federally-funded Educational Opportunity Centers located throughout the country. These centers primarily serve displaced or underemployed workers from families with incomes under $24,000. Unfortunately, there is no national directory of EOCs. The best way to find them is to do an Internet search for "Educational Opportunity Center" along with the name of your state. Often these centers are based out of a college. Once you find an EOC in your state, contact them to find the EOC nearest you.