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Student Loan Savvy 

The realities surrounding higher education and its financing have been changing at an alarming pace. According to the US Department of Labor, about 90 percent of the fastest-growing jobs of the future will require some post-secondary education or training. This comes at a time of unprecedented costs—the average tuition rate has nearly doubled over the last decade. A number of financial aid opportunities exist, but parents and students entering college have to work through a complex application process and thoroughly research options to ensure they’re maximizing the benefits of federal aid and choosing the most suitable financing for their particular circumstances.

“Planning is of the utmost importance,” says Daniel Sistarenik, the director of financial aid for the State University of New York at New Paltz. “The knowledge parents and students need to gain is rather substantial. It’s not like going out and buying a vehicle—this is an investment in the student’s future.” He says that planning should start in the early high school years, when most families begin to get an idea of how much a college education will cost. Both the direct costs of education (the tuition, fees, room and board) and the indirect costs (books, supplies, transportation, and personal expenses) should be considered. Sistarenik recommends that families use the FAFSA4caster, an online tool that was introduced in 2007 to give an early prediction of a student’s eligibility for federal aid. The program is able to reveal what type of federal aid the student is qualified to receive (including grants, loans, and work study) and also gives an estimation of the award amount for each category based on the type of school the student plans to apply to. When it’s time to fill out the real form to apply for federal financial aid, the Free Application for Federal Student Aid (FAFSA), having completed the FAFSA4caster will help expedite the process.

After students have applied to schools and received acceptance letters, Sistarenik says college financial aid offices send out letters that estimate how much aid a student would receive if attending that school. In this phase he cautions parents and students to carefully read and question award letters. Often, especially with more costly private schools, he says institutional awards will be offered with conditions—for example, the money given may only apply during the first year of attendance or upon maintenance of a certain grade point average.

Students will want to take advantage of whatever “free” money they can, in the form of grants or scholarships. “We don’t encourage borrowing unless absolutely necessary,” Sistarenik says. He recommends applying for as many scholarship opportunities as possible, utilizing free award databases like FastWeb.com. FastWeb users create a profile based on their education and career objectives, hobbies, background, and more to be matched up with the most applicable scholarship opportunities. The government also offers money that doesn’t have to be paid back, most commonly in the form of Pell Grants, which are based on need and awarded to students who are enrolled in classes earning at least six credits.

Making sense of all the financing options is one of the most complex parts of the college process. After publishing his first book with coauthor Joann P. Digennaro, The Prentice Hall Guide to Scholarships and Fellowships for Math and Science Students (1993) on student financial aid and including his e-mail address for readers who had additional questions, Mark Kantrowitz was astonished by the number of questions he received. In 1994 he founded FinAid.com, and started proactively answering questions online and compiling an extensive resource of financial aid information out of Cranberry Township, Pennsylvania. Since the site’s inception, Kantrowitz says it’s helped more than 50 million people figure out how to pay for college.

His criterion for choosing a student loan is simple—generally, it’s what’s cheapest when it comes to interest rates and fees. “Given that cost is a dominating factor in education, minimizing cost is a key consideration,” Kantrowitz says, but adds to also be aware of secondary factors like customer service.
When families receive their aid report back after filing the FAFSA, it will detail which federal loans the student is eligible for. Among these will be the Perkins loan, the subsidized and unsubsidized versions of the Stafford loan, and the Parent Loan for Undergraduate Students (PLUS).


The Perkins loan is the most beneficial federal loan a student can receive, according to Kantrowitz. It’s awarded to students that demonstrate exceptional financial need and is subsidized, so the government pays the interest during the in-school period and during deferment after graduation. It has a 5 percent interest rate with no fees and is administered by a revolving fund at the school. The Perkins loan also has one of the longest deferment periods—nine months—and is paid back over a span of up to 10 years.

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