Should you take out a loan?

When you hear news stories about student debt in America, what’s being referred to is the loan part of the paying-for-college equation. Many students decide they need to borrow some money to complete their financial aid packages. It’s a useful part of the financial aid formula, but it can get out of hand and leave graduates with decades of debt payments.

The actual “Cost of Attendance” for college is unique for each school, and TOPS may not cover all of it. It includes tuition, fees, room and board, books, class supplies, computer costs, transportation and ... wait for it ... personal expenses. (Or did you not want to drink any lattes or go to any movies next year?)

Expenses, fees, books ... loans can be used to cover the costs that go beyond your TOPS award and any other grants and scholarships. Your college’s financial aid office may calculate an estimated Cost of Attendance for you and put together a financial aid package just for you that considers your TOPS status and adds any academic scholarships or grants for which you qualify. This package may include a recommended loan amount to get you up to the total cost of attending.

Pay attention to the different types of loans and the terms. If you must supplement your “free” money (grants & scholarships) with a student loan, look to the subsidized Federal Direct Loan first. The subsidized loan is based on financial need and the government will cover the interest while you are in school. Next would be the unsubsidized Federal Direct Loan (student is responsible for the interest and it’s not based on financial need). Parents may want to consider the Federal Plus Loan to cover any unmet costs.

Above all, remember the No. 1 piece of advice experts give about student debt: Only borrow what you need! Excessive student debt has become a crisis nationwide, and with loans you DO have to pay the money back!

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