It’s Your Money Column – Resources Available to Help with Student Loans
Question: My son is a junior in high school and he plans to attend college. We want to know where to turn for help about student loans.
Answer: The schools where he applies will provide information covering the entire financing package, which might include scholarships, grants, work study and student loans.
The first step, regardless of the type of loan, is to complete the Free Application for Federal Student Aid. You can find the FAFSA application form at the Colorado State University and the Colorado Student Loan Program, or CSLP, Web sites given below. The FAFSA form should be filed at the school of choice by Feb. 15 of the year your son plans to enter school. The school will then notify you about loan eligibility.
Some schools participate in the Direct Loan Program from the U.S. Department of Education. Other schools use the Federal Family Education Loan, or FFEL, program administered by CSLP. CSLP connects borrowers to local lenders such as banks, credit unions and savings and loan associations.
Colorado State participates in the Direct Loan Program. The CSU Student Aid Web site at http://sfs.colostate.edu (click on student loans) provides comprehensive information about the federal program. The CSLP Web site at www.cslp.org covers information including FFEL-preferred lenders associated with various schools.
A word of caution: Learning about students loans can be complicated, so don’t wait until the last minute to start becoming familiar with terms and choices. Use the CSLP "Itinerary" that takes you step-by-step through what needs to be done to prepare for financing education. At the same time your son is comparing various schools, you can learn about scholarships and other types of financing packages.
Information available at the CSLP Web site includes information about various colleges as well as the opportunity to apply online. Information about financial aid is available through their section called "Exploring Student Financial Aid." Tips are provided on how to manage money and credit cards while attending college. Almost all loans must offer borrowers four different options for repayment: standard, graduated, income-sensitive, and extended. For the standard program, each payment is fixed and usually costs the least over the lifetime of the loan. The graduated option, which usually costs more overall than the standard program, anticipates that you will have a higher income after you’ve worked for a while and sets monthly payments to increase over time. The income-sensitive plan may change if your income rises or falls, but the payment schedule assumes a 5 percent rise in income every year. The extended plan is for borrowers with more than $30,000 in total debt allowing them to extend their repayment for as much as 30 years.
Details may be different for each type of loan. Compare total costs for the lifetime of each loan and repayment choice.
by Judy McKenna, Ph.D., CFP, Family Economics Specialist, Colorado State University, Cooperative Extension, mckenna@cahs.colostate.edu, 491-5772