A new academic year has started, but many college students may be worrying about more than just their classes. For some, their financial aid package wasn’t enough to cover the amount due to the school.
When your federal student loans won’t pay your balance, you’ll need to consider alternative ways to pay your bill and manage expenses. Here are five potential avenues to pursue.
[Discover 11 ways to raise last-minute cash for college.]
1. Cut costs: One of the biggest factors for cost savings can be where you live. If you live near the college, consider commuting. If that’s not an option, look into an apartment in an area that is cheaper than living on campus.
Though your financial aid may be reduced due to the change in housing, the cost savings will still typically make it worthwhile. And get ready to make friends as generally the more roommates you have, the cheaper the costs.
You can also look into less expensive housing options on campus. Are forced triples or quads available? These rooms are designed for two or three students but, due to housing shortages, will accommodate three or four students. Schools will decrease your housing charge for taking one of these rooms.
Another strategy is dropping to part-time enrollment to lower tuition costs. Your grants and scholarships may be reduced, but you would still be eligible for the full amount of your federal loans.
This is a risky strategy if overused. You could reach your aggregate loan limit before you finish your degree, and then you’ll need a plan to cover your remaining semesters.
An added benefit to a part-time schedule could be freeing up hours for a job to earn funds for college expenses. But the downside is that students who attend less than full time are much less likely to graduate.
[Learn more about college costs and financial aid.]
2. Explore alternative payment options: Depending on your balance, you may be able to enroll in a monthly payment plan. These plans typically charge a nominal enrollment fee, but they allow you to make 10 payments over the course of 10 months interest-free, which is much cheaper than taking on additional loan debt.
Work-study funds may be used if your work-study award is greater than your balance. You’d need to speak with your bursar’s office, but you may be able to arrange payment with your work-study earnings over the course of the semester.
3. Appeal for additional aid: Your school has the option to give you more aid but usually will only do so if your balance is a few thousand dollars or less or you ask for a very specific amount.
But be sure you have a compelling reason why you deserve more aid and explain your change in financial circumstances.
Whatever the reason for the appeal, make it clear that you could be a retention risk. Some schools cover small student balances to keep students from withdrawing.
[Know five strategies for appealing a college financial aid package.]
4. Borrow more loans: Once you have exhausted all options for lowering your costs or receiving more aid, you may need to consider borrowing more money.
As an undergraduate student, it is unlikely you could borrow a private loan without a co-signer. A co-signer is just as liable for the loan as the borrower, but private loans do not offer the flexible repayment, postponement and forgiveness options of federal loans.
Before turning to private loans, consider if your parent could borrow a Parent Direct PLUS Loan. These loans share many of the federal student loan benefits, and your parent can borrow up to the cost of attendance minus your current aid.
If your parent gets denied the PLUS loan, you may receive an additional $4,000 to $5,000 unsubsidized Stafford loan depending on your year in school. This amount may cover your existing balance or make the balance affordable.
5. Reconsider college choice: Sometimes, even if you pursue every possible option to cover college costs, you still may not be able to. It’s frustrating and disappointing, but going to a school that you can’t afford can cause financial stress for much of your adult life.
If you or your parents can’t get a loan and you can’t pay for the balance out of pocket or through a monthly payment plan, you may need to reconsider your college choice.
Going to a school with a lower net price may be more affordable for at least the first couple of years. You can then look into transferring to the more expensive school.
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5 Ways to Handle a Student Loan Shortfall originally appeared on usnews.com
