Church Pension Group | Student Loans

Student Loans

Paying for college or a graduate degree is expensive. Whether you are sending your child to college or financing your own education, there are a number of options you should consider. Start with research to identify scholarships, grants, and other sources that will pay a portion of the tuition for you. Then, research the financing options available, and be sure to understand the repayment options before you borrow.

When choosing a college, an important consideration is the cost of tuition, room and board, and fees.

Schools provide the total expected cost to attend so you can compare. The information is generally provided on the school’s website.
Consider a state school or community college for the first two years, as they are generally less expensive than private colleges. Many private colleges accept transfers from state or community colleges, saving you tuition and allowing you to earn a diploma from the private school.

A number of good resources, including government resources, are listed below.

Financing Options

Having a financing plan before enrolling is essential.

- 529 Savings Plans – 529 Savings Plan are state-sponsored savings plans offering tax breaks and other advantages such as tax-free earnings. These plans are generally used to save for your children’s, or grandchildren’s, college expenses. Most plans allow you to invest a lump sum or make periodic deposits. There is an annual cap on how much can be contributed without paying gift tax.
- Savings – Savings may be a good source of funding for education, especially if you are paying for your own education.
- Scholarships – Many scholarships are available for students with a special interest or talent. Don’t leave this money on the table.
- Parent/Grandparent Help – If someone is able to help the student pay for higher education, bypass the student and pay the college directly. Payments made directly to the college aren’t considered taxable gifts.
- Payment Plans – Check to see if the school offers a plan that allows you to spread annual tuition payments over eight or ten months.
- Financial Aid – Aid is based on two factors:
  - - The cost to attend the school, including tuition, fees, room and board and other
  - - Your family’s ability to pay. This is the expected family contribution (EFC).
  To begin the financial aid process you must fill out the Free Application for Federal Student Aid (FAFSA) after January 1 of the year you will attend college. The FAFSA is also required for all Government grants and loans.
- Private loans – Private loans should be used only after all federal options have been exhausted. These loans may have higher interest rates than government-sponsored loans, may require a co-signer if the student is the borrower, and may not have a deferment option.

Repayment Options

The first thing you should know is your student loans are not likely to be canceled or discharged! You must repay a student loan even if finances are difficult. If you don’t make your monthly loan payments, you will risk becoming delinquent and risk going into default. The good news is that there are a number of repayment options.

- 529 Savings Plans – 529 Savings Plan are state-sponsored savings plans offering tax breaks and other advantages such as tax-free earnings. These plans are generally used to save for your children’s, or grandchildren’s, college expenses. Most plans allow you to invest a lump sum or make periodic deposits. There is an annual cap on how much can be contributed without paying gift tax.
- Savings – Savings may be a good source of funding for education, especially if you are paying for your own education.
- Scholarships – Many scholarships are available for students with a special interest or talent. Don’t leave this money on the table.
- Parent/Grandparent Help – If someone is able to help the student pay for higher education, bypass the student and pay the college directly. Payments made directly to the college aren’t considered taxable gifts.
- Payment Plans – Check to see if the school offers a plan that allows you to spread annual tuition payments over eight or ten months.
- Financial Aid – Aid is based on two factors:
  - - The cost to attend the school, including tuition, fees, room and board and other
  - - Your family’s ability to pay. This is the expected family contribution (EFC).
  To begin the financial aid process you must fill out the Free Application for Federal Student Aid (FAFSA) after January 1 of the year you will attend college. The FAFSA is also required for all Government grants and loans.
- Private loans – Private loans should be used only after all federal options have been exhausted. These loans may have higher interest rates than government-sponsored loans, may require a co-signer if the student is the borrower, and may not have a deferment option.

Resources

We've done some of the research for you, here is a list of websites to help you along the way.

- 529 Savings Plans – 529 Savings Plan are state-sponsored savings plans offering tax breaks and other advantages such as tax-free earnings. These plans are generally used to save for your children’s, or grandchildren’s, college expenses. Most plans allow you to invest a lump sum or make periodic deposits. There is an annual cap on how much can be contributed without paying gift tax.
- Savings – Savings may be a good source of funding for education, especially if you are paying for your own education.
- Scholarships – Many scholarships are available for students with a special interest or talent. Don’t leave this money on the table.
- Parent/Grandparent Help – If someone is able to help the student pay for higher education, bypass the student and pay the college directly. Payments made directly to the college aren’t considered taxable gifts.
- Payment Plans – Check to see if the school offers a plan that allows you to spread annual tuition payments over eight or ten months.
- Financial Aid – Aid is based on two factors:
  - - The cost to attend the school, including tuition, fees, room and board and other
  - - Your family’s ability to pay. This is the expected family contribution (EFC).
  To begin the financial aid process you must fill out the Free Application for Federal Student Aid (FAFSA) after January 1 of the year you will attend college. The FAFSA is also required for all Government grants and loans.
- Private loans – Private loans should be used only after all federal options have been exhausted. These loans may have higher interest rates than government-sponsored loans, may require a co-signer if the student is the borrower, and may not have a deferment option.

Tips & Resources - Student Loans

Check the financial aid options available from your state. Many states offer lower-cost loans, grants, or scholarships to students.

Using retirement savings to pay for education should be your very last option. More resources are available for funding an education than a retirement, and you are giving up valuable earnings on any savings you withdraw.

Know your grace period. Most student loans have a six-month grace period, which means you won’t have to make payments until six months after you graduate, drop out, or drop below half-time status.

Depending on your income, there may be tax deductions and credits available. Please make sure you discuss the American Opportunity Credit and The Lifetime Learning Tax Credit as well as the Tuition and Fee Tax Deduction with your tax preparer.

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