Higher education is a great investment in your future…now how do you pay for it?

Of course, colleges handle financial aid in different ways. They can participate in different programs and have different processing deadlines. You’d expect that, right? We’ll try to explain some of the other pieces of the puzzle here, to help you get started.

Federal Loan Programs
Each school adopts one of two federal loan programs, both of which are governed by federal regulations that determine the loan programs, loan limits, and repayment options.

Federal Family Education Loan Program (FFELP): Private lenders provide the loan funds and work with guarantors to back the loans.

Direct Loan Program: The government provides the loan funds and backs the loans.

Your financial aid award package will tell you what types of education loan programs you are eligible to accept. If you have remaining unmet need, you may need parent loans or alternative education loan programs to cover all your expenses. Ask your school’s financial aid office to help you determine which programs are right for your circumstances.

Note that of the loan types listed below, you may or may not be eligible for all of them – again, ask your school’s financial aid office for clarification, since they will determine your eligibility for both loan and non-loan programs. Also, remember that the loans with the lowest interest rates and the most options for deferring payment are awarded to those with the greatest need.

Undergraduates
These government loans, offered through FFELP or the Direct Loan Program, have low interest rates and do not require credit checks or collateral. Student loans provide a variety of deferment options and extended repayment terms. Eligibility for each type of loan usually depends on need as determined by the Department of Education or the financial aid office. In addition, many lenders offer private loans to cover unmet need.

Parents
If you are a parent of a dependent undergraduate student attending an eligible college, university, or trade school, you may take out a PLUS loan to fund your child's entire cost of attendance, minus any other financial aid. Parents with satisfactory credit may qualify for a PLUS loan regardless of their income level or financial assets. PLUS loan proceeds may be used to pay all authorized education expenses, and are offered by both the federal government and private lenders.

Graduates
Graduate students have access to a variety of low-interest loans and other aid programs through the FFELP and Direct Loan Program. Many are similar to the undergraduate loan programs, yet with higher annual loan limit amounts. Others are unique to a graduate student's specific area of study. In addition, many lenders offer private loans to meet unmet graduate need.

Monthly Payment Plans
Students and families have many choices to help them meet educational expenses that are not covered by financial aid. One great option that many colleges offer is an interest free monthly payment plan. While there are differences among plans, general features of monthly payment plans include:
• The option to pay educational expenses over time without interest charges
A one-time enrollment/application fee (usually $50 - $100)
• Optional insurance (for example in case of unemployment, disability or life) in case the applicant becomes unable to fulfill the terms of the payment plan

How monthly payment plans work:
Generally, colleges and universities work with a payment plan company that administers a plan (manages billing, processes payments, and provides customer service to students and families) for the college. The college, through either the financial aid office or billing office, will provide information about this company and terms of the program offered at the school. Many of these payment plan companies have Internet sites that can help answer questions and provide interactive planning tools.

The two main benefits to using a monthly payment plan are that they are interest free and costs are spread out over a number of months rather than in a lump sum.

These plans are generally a win-win for a family and colleges. Families that have sufficient income can benefit from the "same as cash" price of education while not having to manage one or two large payments per year. Additionally, these payments may be deductible - contact your school for more details.