Financial Matters: Payment Options for College

Students who will begin college in the fall semester should receive their tuition bill a few months before the term begins. If you need more information, contact the bursar’s office or student financial services. Check the bill carefully to make sure you (if applicable) received awarded financial aid. Some schools require you to accept the financial aid offer, which is found in the student’s portal.

Tuition Payment Plans - Tuition payment plans provide you with the option to spread out tuition payments. Plans vary among colleges. Some allow multiple installments, while others require that you pay one lump sum per semester. A possible advantage to most tuition payment plans is that you might not incur the interest and finance charges that come with loans and borrowed money. Contact your college for more information about their tuition payment plan options.

Home Equity Loan or Line of Credit - An alternative or additional measure to pay for college is to use the equity in your home (or your parent’s home if you’re a dependent) to help fund your college education. There are both home equity loans and home equity lines of credit. The difference between a loan and a line of credit is that loan proceeds are received in one lump sum. Although each person’s financial situation is different, you and your family may decide that one of these options is right for you.

Parent PLUS Loan - Parent PLUS loans are Federal loans designed to help parents pay for college costs. To apply for a PLUS loan, your family must complete the FAFSA financial aid application. Some colleges require additional paperwork.

Parents may borrow up to the total cost of attendance, minus any other financial assistance received by the student. Repayment begins 60 days after the loan is disbursed, although some parents may qualify to defer payments until after the student leaves college (note—interest continues to accrue during deferment). The current interest rate on PLUS loans is 8.05%, which is fixed for the life of the loan. There’s also a loan origination fee of 4.228% of the amount borrowed.

If you request a deferment, you don’t make payments if your child is enrolled at least half-time and for an additional six months after the student graduates. You can speak with your loan officer about the deferment of payment. All borrowers must complete credit counseling for parent PLUS loan borrowers. Loans are typically paid back in 10-25 years.

Credit Cards - About 85% of colleges now accept credit cards for tuition and fees. On the surface, this seems like an easy way to pay for college, and perhaps rack up some rewards points at the same time. On the downside, many colleges charge additional fees for using this option.

According to creditcards.com, two-thirds of colleges charge a service fee - 2.75% is the most common – for this option. Charging $10,000 in tuition to your card could add an extra $275 to your cost. Add in the higher interest rates generally charged by credit card companies, and the added benefit of those “rewards” start to shrink pretty quickly.

With education costs soaring, college affordability is a significant concern for many families. Apella works with individuals and families providing independent, fee-only investment advice and planning services. Reach out for a free consultation and overview of our services at collegeplanning@apellawealth.com.

Disclosures:

Apella Wealth is an Investment Advisory Firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered or excluded or exempted from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. Apella provides this communication as a matter of general information. Any data or statistics quoted are from sources believed to be reliable but cannot be guaranteed or warranted. Apella does not provide tax or legal advice and nothing either stated or implied here should be inferred as providing such advice. No current or future client should assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for personalized investment advice.

Prepared especially for our clients and their families. The information included in this newsletter is general and does not constitute educational, financial, accounting, legal, or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on the material contained herein.

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