September 16, 2019
It is never too early or too late to start saving for future education expenses or manage student loan debt. Below are some tips on saving, borrowing and paying for education.
Tips for Saving
Use a Financial Calculator – Cape Cod 5 offers a range of personal financial calculators on our website, including college and other savings calculators as well as debt and budget calculators that can help you as you are preparing for and paying off student loan debt.
Consider a 529 Plan – A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. At the college or graduate level, funds from a 529 plan can be used for tuition, fees, books, supplies, approved study equipment and sometimes room and board. (note: it is a .com website)
- Set up an installment plan – Rather than paying your tuition in a lump sum, consider spreading it out through an installment plan. Most schools offer payment plans with no interest; however, there may be a small fee to set it up and there are often charges if you fall behind in your payment schedule.
- Consider Community College or a Vocational School – Community colleges and vocational schools are valued alternatives to traditional four-year schools. Many students choose to begin their higher education at community college as they explore their career and education options. Vocational schools often present students with lucrative career opportunities in various trades at less of a tuition cost. Community colleges and vocational schools are also known to offer continuing education programs, for those interested in advancing their learning.
- Remember to Continue Saving for Retirement – Retirement savings take priority so aim to place a suitable percentage of your income into your retirement fund first, then begin working on your or your child’s student loan savings and payments.
Tips for Borrowing
Plan Ahead - A good rule of thumb is to allocate 10% or less of income to student loan repayments. Consider the career and salary aspirations for you or your child and aim to borrow no more than a projected one year salary. Since student loan repayments take ten years, this is an easy way to follow the 10% rule.
- Apply for Financial Aid early - Submit the Free Application for Federal Student Aid (FAFSA) as soon as the form is available (typically on October 1 each year). While this application is used to determine federal student aid, many colleges and universities use the FAFSA to allocate need-based awards. These resources can diminish the longer you wait, so it is important to act early and meet the FAFSA deadlines.
- Consider the differences between federal and private loans - Federal loans come with consumer protections like flexible repayment, deferment and loan-forgiveness and provide a six month buffer after graduation before payments are due. Interest may even be paid on your loan while you are in school or pursuing higher education. Private loans often start with lower interest rates, but those rates are variable and can rise. The terms are often more strict with less debt-relief options. Most private loans also require a co-signer. Read more about these two options here.
- Consider the New England Regional Student Program (RSP) – This program enables New England residents to enroll at out-of-state New England public colleges and universities at a discount. Students are eligible for the RSP Tuition Break when they enroll in an approved major or program. Read more about this program here.
Tips for Paying Student Loan Debt
- Consider changing your repayment plan - Remember, you are allowed to change your federal student loan repayment plan at any time and for free. There is less flexibility in this regard for private student loans. Read more about repayment plans here.
- Explore work-related student loan forgiveness programs - There are several programs that offer student loan forgiveness, especially to teachers, doctors, lawyers and STEM graduates that are willing to live in a certain area and/or serve in a high-needs community.