College costs looming large? Take this commonsense advice to avoid financial pitfalls

Even with careful saving, planning and scholarship money, many students and their families have gaps in funding a college education, leaving them responsible for all or some portion of the overall cost. Plus, the fees can seem never-ending.

Below are several considerations for making higher education more affordable, so students (and their parents) can leave college with the least amount of debt possible.

Loan types

The best loan option is the federal student loan for most student borrowers because it almost always costs less and is easier to repay. This loan’s max is $5,500 for the first year, $6,500 for the second and $7,500 for subsequent years, with a max of $31,000 for a bachelor’s degree. Federal student loans offer the lowest interest rates, subsidized loan options based on a student’s financial need and the best repayment plans. With these, the student assumes the debt.

Your next best option is private student loans. These types of loans are available from banks, credit unions or higher-education lenders. Private student loans offer the ability to shop around for the best interest rate determined by your credit history and various repayment options. Many times, the student can assume the loan at some point.

CommunityAmerica offers a student loan that functions as a line of credit, which might be the right fit for your family. The credit union offers flexible repayment options and a co-borrower release once the student can qualify to hold their own loan.

Your last option should be the U.S. Department of Education’s Direct Parent PLUS loan. You apply for the Direct Parent PLUS loan through the federal student aid website. You are eligible to borrow the full cost of attendance minus any financial aid your student received in the form of scholarships or loans.

This loan often has a higher interest rate than secondary or private student loans. The parent is the borrower, leaving the parent responsible for all payments, with no option to transfer the loans to the student. There’s no minimum credit score with this loan. While your child doesn’t have to start paying back their federal loans until they’re out of school, the Direct Parent PLUS loans go into immediate repayment.

Ways to reduce costs

A post-secondary education comes with some unavoidable expenses, such as books and tuition. However, there are ways to reduce your overall cost of college by saving in other areas.

Campus jobs: On-campus jobs offer a bit of income and may even provide free room and board. They are easily accessible and provide more structure for a college student’s experience.

Living off-campus: Some universities do not allow students to live off-campus, but if it is allowed, this might be a feasible way to save extra money. You should consider where your school is located and the cost of living there, as well as additional expenses such as utilities and transportation to campus. Finding roommates to split rent can also further reduce your living expenses.

Community college: The first year is widely considered the most expensive year of a college education. Many students choose to attend a community college for the first year or two of their education because tuition rates there are typically a fraction of the cost of state or private universities. Students can knock out their general education classes and give themselves time to consider what they want their study focus to be.

Obtaining department scholarships: Once a student has settled on a major, it’s crucial they get to know the faculty and staff in their department. There may be departmental scholarships available that are not always known. Often, faculty choose these scholarship recipients, making it important for students to know their professors and advisors. Getting involved on campus by trying clubs and rec activities will expose students to the kinds of aid and scholarships that may be available in those areas as well.

Graduate on time: Only 44% of bachelor’s degree recipients completed their degree in 48 months or less, according to the National Center for Education Statistics. Students should set realistic expectations for how long it may take to complete their education and plan their workload around graduating on time to avoid taking out more loans.

Take a year off to save

There is no rule stating students must attend college right after graduating high school. If it does not make financial sense for the student and their family, consider the option to have them take time off to save. Families should not take on debt they cannot afford if college is not feasible right after high school graduation.

Discussing expenses as a family

In a few short months your young adult will have more independence than ever before, making it a crucial time to discuss money and finances with them. Don’t avoid discussions on money, especially regarding funding their college education. It is important to plan together and be clear about who will cover additional costs not covered by loans.

If you have many children to fund, it is wise to decide ahead of time how much you can contribute per student.

Next steps

CommunityAmerica helps make the process easier by providing education about the options that exist and how to understand which ones might be best. The credit union can help you make informed decisions. A College & Career Planning page features tools that will help you get started. Make an appointment with a college planner to guide you in finding options that work for your family.