The average private, four-year college yearly tuition is about $31,000. Despite scholarships, grants and free financial aid, you may still need additional funds to cover the cost of college tuition. Here are some college loan options from Discover Student Loans.
Federal and Private Loans
Federal student loans are made by the government and private loans are made through a bank.
The interest rate for a federal loan is the same for all borrowers. Federal loans offer various repayment options but can be more expensive than a private loan.
A private student loan, typically made through a bank, offers variable and fixed interest rates. Variable rates can start off low, but go up and down during the life of the loan depending on market factors. A fixed rate stays the same through the life of the loan.
If you are already a customer of the financial institution where you’re applying for the student loan, it may offer loyalty discounts and auto-pay where your monthly payment is automatically deducted from your account.
Consider fees, interest rates, the monthly payment and total loan cost when looking into a college loan. Compare federal and private loan options and choose the best one that fits your financial situation.
The 529 Plan
The 529 Plan, named after the Internal Revenue Service code, is a great way for families to save for college. This plan allows for the account holder to withdraw the savings tax-free for qualified college tuitions.
There are two version of the 529 Plan: 529 Savings and 529 Prepaid.
The 529 Savings Plan is a more traditional type of account where the money is invested in an IRA or a 401K.
Under the 529 Prepaid Plan, the tuition can be prepaid at current costs and credits can be used later for qualifying in-state schools.
Nearly every state offers a 529 Plan, but differ from state to state. You don’t have to invest in your state’s particular plan, but some offer tax-incentives for in-state accounts. Enrollment can be made through the state’s plan manager or through a financial advisor.
What Does the Loan Cover?
In addition to tuition, there are expenses for housing, textbooks and fees for activities and library use. Student loans cover these costs. Take these additional expenses into consideration when applying for a loan.
Carefully review all your college loan options to see what best works for you and your family.