How to Pay for College

How to Pay for College

Ben Kittner over at the College Foundation of North Carolina e-mailed me this week to say September was College Savings Month. I’m thinking that might surprise friends who just sent their kids off to college. I’m sure they might see it more like kiss-my-savings-goodbye month. But Kittner says a lot of folks actually start their

Ben Kittner over at the College Foundation of North Carolina e-mailed me this week to say September was College Savings Month.

I’m thinking that might surprise friends who just sent their kids off to college. I’m sure they might see it more like kiss-my-savings-goodbye month.

But Kittner says a lot of folks actually start their savings habit in September. All that back-to-school talk gets them in the mood.

Of course,  some don’t wait. The state’s 529 college savings plan has seen a 20 percent increase in accounts in the past year,  and the total value of the funds is up 8.1 percent over last year,  Kittner said.

If you are a 529 saver,  here’s a tip that can keep you from dipping into your checking account: The American Recovery and Reinvestment Act added computers,  computer equipment and Internet access to the list of qualified college expenses for this year and next. That means you can withdraw 529 cash to pay for those items without paying taxes on the money.

Of course,  the 529 plan isn’t the only way to save,  and if time is short,  you need to come up with another way to cover tuition,  books and food. I do not recommend relying on blood or plasma donations.

If you’re thinking of loans,  there are the traditional federal loans – FASA,  Stafford and Plus – and bank loans. The Wall Street Journal this week reported that students took out some $75 billion in federal loans during the last academic year. And the Project on Student Debt reported this spring that the proportion of undergraduates who held private student loans jumped to 14 percent in 2007-2008 from 5 percent in 2003-2004.

If those avenues are closed to you,  some students turn to peer lending Web sites. People Capital (http://www.people2capital.com www.people2capital.com) has a scoring system that evaluates the credit risk of each student before you sign on to give them a loan. Other sites are more along the social networking line. Sign up and get grandparents,  aunts,  uncles,  family friends to know you need cash to go to school or to pay off the loans you took out at other sites.

Kiplinger,  the financial newsletter,  recommends GreenNote. According to GreenNote’s Web site its loans have a 6.8 percent interest rate and don’t require a co-signer or credit history. There is a one-time fee of 2 percent.

Another,  GradeFund.com,  requires the student to make A’s or B’s (it checks transcripts) before they get the cash. It may remind you of grade school – $5 for every A.

Before signing up at any of these sites,  read the loan rules carefully and make sure you understand the payback terms. Shop around.

Personally,  I’m not sure why you’d use a middle man that charges a fee when all you’re doing is hitting up the relatives. Why not ask them personally to make a one-time donation to your 529 account? Be sure to send thank you notes and to keep them posted on your grades. You could even invite them to a game. To find out more about North Carolina’s plan,  go to http://CFNC.org/NC529.

One last tip: If you do take out a loan,  figure out  whether your future salary will cover the debt you’ll soon be swimming in.One place to look for a calculator is www.finaid.org. The site is a good place to find out about all kinds of financial aid and has a Student Loan Adviser calculator.

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