After you have estimated college expenses in the College Expenses dialog, examine your cash flow for the years your child will be attending college. If your cash flow is negative, you will probably need to adjust your plan to meet the financial demands of this period. Here are some ways to do this:
Save more (and earlier)
Increasing your taxable savings will provide additional funds to meet college expenses. If your children are also saving for college, you could add their contribution as income during that period.
Look into financial aid
Financial aid is money that is given, lent, or paid to you so you can pay for college expenses. Financial aid is available from private sources, colleges and universities, or state and federal government agencies. To find out more about financial aid:
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Explore non-loan forms of financial aid, including Gift Aid (grants and scholarships), Work Study, and Military options (including ROTC and the service academies).
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Look into loans (including education loans and other types of loans), installment payment plans, and prepaid tuition plans.
How to apply for financial aid for college expenses
To ensure that you're considered for federal, state, and institutional (college-based) aid, follow these guidelines:
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Complete and submit a Free Application for Federal Student Aid (FAFSA) as soon as possible after October 1 each year. Check it carefully, include all required signatures, and submit it promptly.
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Contact the financial aid office at the colleges you are interested in and request information on available financial aid and the application process.
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Financial aid administrators at the colleges where you are accepted will verify the information from your FAFSA, determine your aid eligibility, and send you a financial aid award letter stating the amount and types of aid (grants, loans, and work study) you are eligible to receive.
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Remember that you must reapply for aid each year you are in school or when you transfer to a different college.
General information about loans
Education loans are made to students and parents and must be repaid, usually with interest. Federal, institutional, and private loan programs are available, and the types and terms of loans available change over time. For the most current information on education loan options, see the Sallie Mae website or visit Federal Student Aid for information on federal loan programs.
Take out a loan to meet the cash flow shortfall
Since each year may have different requirements, you can set up different loans for each year that your child is in college. You can adjust the repayment schedules of the various loans individually or consolidate the loans into one loan once college is over. In this way, you keep your borrowing to what you actually need, and you can examine how the repayment will affect your lifestyle. You enter loans in the Loan Accounts or Planned Loans dialog.
One big loan vs. several smaller loans
You could take out one loan to cover the entire cost of college. This may seem like the easiest approach. However, you will only use funds as bills arrive. If you borrow all the funds at once, you will be paying interest on the total from the first day of college. Borrowing in stages reduces your total interest cost and more closely reflects how you will actually meet the financial need.
Rolling those loans into one loan at the end of college allows you to control your repayment more effectively. If you do decide to take out one loan at the beginning of college, put the money you won't spend that year to work for you.
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