Monday, September 16, 2013

Filling in the Gap Responsibly

The 2013 school year is in full swing! It’s never too late, or early, to start thinking about how best to pay for your education. Mid-Minnesota Federal Credit Union recommends students plan out their college financial strategy in three steps: Maximize free money, utilize cheap money next, and then fill in the gaps!

Maximize Free Money

Start your search for college cash with scholarships and grants, which means no out of pocket expenses for you and you don’t have to repay them. Keep in mind, however, that if you are awarded a scholarship or grant, your college will deduct that amount from the financial aid they would otherwise have given you.

Here are different programs worth your time to take advantage of:

Utilize Cheap Money Next

Federal student loans would be the next place to look after searching for “free” money through local scholarships, grants, etc. Here are the two most common:

  • Direct Student Loans (Stafford) Offered by the Federal Government, these low-interest loans come in two different options:

  1. Direct Subsidized Loans 
-Financial need requirement
-Interest is paid by the gov’t while you are enrolled, during the six months grace period, and in deferment.

             2.   Direct Unsubsidized Loans
- No financial need requirement
- Student is responsible for paying the interest that accumulates while they’re enrolled, during the grace period, and during deferment. 

  • Perkins The Federal Perkins loan has a lower interest rate and longer grace period than the standardized direct loans, but is not subsidized. Exceptional financial need is required and determined by the student’s FASFA information. 

Fill the Gap Responsibly 

After utilizing free and cheap money, for many students there are still expenses remaining. This is where alternative loan options come in. Here are the two most common types:

  • Private These are not offered through the federal government, so it is important to look for a loan program from an institution you trust. 
- Look for a loan with zero origination and other additional fees, low interest rates, flexible deferment and repayment options, and an easy application process.
- Compare all options with MMFCU’s Student Choice Private Lending Solution. This program offers zero origination fees, low interest rates, and flexible repayment options. 

  • Federal Plus (Parent Loan for Undergraduate Students) These loans are in your parent’s name, cannot be transferred to the student, and include origination and other fees.

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