The bottom line, you are going to have to be creative in funding your child’s education going forward.  Search for scholarships, talk with your financial aid office, ask friends and family for help.  As a last options, consider loans.  Some tops student loan sites include:

• http://www.studentloannetwork.com/ – General information on financial aid and student loans
• http://www.staffordloan.com/ – Detailed information on the federal Stafford Loan
• http://www.parentPLUSloan.com/ – The federal Parent Loan for Undergraduate Students
• http://www.privatestudentloans.com/ – Private alternative loans for college

It is no secret that college is expensive and tuition costs are continuing to rise. We put together the infographic below to examine the costs associated with a college education, including the hidden costs you may not be factoring in like health fees, gas money, entertainment and all the Red Bull you’ll consume during finals. The graphic also outlines how funding occurs and how students can fill the gaps left in paying for college. Feel free to share with your fellow students, friends and family!

Link: http://www.privatestudentloans.com/fill-the-gap/

Parent PLUS Loans

Parent plus loans are available through the government and offer a variety of benefits. Benefits such as deferment, forbearance, and even some cancellation options are a perk of PLUS loans that are not always available with private loans. However, the interest rate is a fixed 7.9%, and higher than some private loans.

One of the most common questions from parents about the PLUS loan is in regards to the credit check. The credit check for PLUS loans is minimal and it’s mostly to make sure that there is no recent bankruptcy or adverse history on record within the past 5 years. If you’re still concerned that your credit will hinder your ability to receive the loan, you should continue with the application process, as students whose parent’s get denied a PLUS loan are entitled to further Stafford loans (at lower interest rates than the PLUS).

>>Read more answers to Parent PLUS loan FAQs

Private Loans

Private loans may actually be a better option than the PLUS loan for some families. Interest rates are now very competitive and come in both fixed and variable. This would allow for less interest over the lifetime of the loan than the Parent PLUS. You should also note that while the loan holder in this case is the student, most loans will suggest that a parent cosign for the student, which is generally a good idea anyway, as it improves approval chances and may lower the interest rate for the loan.

A downside of private loans is that many of the repayment benefits that you find with federal loans are not all available, however, the lower interest rates could outweigh this point. There are also other benefits of private loans to consider, such as the disbursal method. Unlike federal loans, private loans get disbursed directly to the student, so they can pay for immediate expenses such as books, or room and board.

>>Compare private student loan options

There is no real answer to “what is the best loan” because this is too subjective and is different for everyone. There are a lot of different factors to consider when looking into funding your child’s education and it comes down to not which loan is the best, but which is best for your family. To help you decide, you’ll simply have to weigh the pros and cons of each option.

1. Teach Financial Literacy

It’s amazing how many students graduate without any idea what a 401K is or how to use a credit card correctly. These are some basic, teachable (and free) steps that can really provide a foundation for recent grads.

• Using basic accounts – Most students have checking/savings accounts well before college, but should still be aware of the basics. Are there minimum balances? What happens if you overdraft? Little tips like these can pay off big in the long run, and prevent avoidable fees while money is tight.
• Credit Cards – One thing my parents taught me when I got my first credit card was don’t buy anything that you can’t afford right now. This has been a huge help, and while I may not get everything I want right away, I have never had an outstanding balance on my card. People may think, “well, what’s the point of having one, then?” To this, I would answer, beginners should be exceptionally careful, using the card only for what’s affordable (except, of course, for an emergency). This will help set a good foundation for lifetime credit use and help grads to avoid even more debt.
• How to save – Students hear tons of financial terms thrown about, (ROTH IRAs, 401Ks, Savings Bonds, etc.) but in most cases, have no idea what any of these things are. Sitting down with your grad to talk about different savings/investing options can be a huge benefit in the long term.

2. Stop the Pressure

With the job market at a low point (though better than last year) finding a job is incredibly stressful for many students. It’s important to keep them motivated during their application process, but do not pressure them or force them to take a job they don’t want. This, of course, is easier said than done, with student loan payments looming on the horizon. To help motivate them, think about setting goals or time limits. Knowing that they have only a certain amount of time to find a job can really help speed the process along.

On a side note: Today, more recent grads than ever are living at home after graduation. If this happens, remember that the house rules in high school may no longer apply. Your child is more adult than kid, and many fights can be avoided by bending some of the old rules, and realizing that your grad may be frustrated with answering to parents again. While this may not help with the finances, it will make this stressful time easier on everyone!

3. Keep Them Healthy

Since the Obama Administration’s recent law, grads are able to remain on parents’ health insurance until the age of 26. Saving students from the high cost of health insurance (or accidents sans-insurance!) can help while they begin to get their life in order.

4. Give Them Credit

College graduates are faced with a lot of firsts – first car, first apartment, first student loan payments, and having a solid credit history can help their future. After teaching basic credit card usage, parents can help students and grads attain their first card, which can now happen in 2 ways:

1. Co-sign for a card – This provides independence, but with security. Just make sure that if you do co-sign, your child remains on top of payments, and be willing to help out a little should payments falter.
2. Obtain a secured credit card – These require an initial deposit, and the amount of the deposit becomes the credit limit. These are great because you cannot spend more than you have, and teaches smart charging! A downside is that it’s more expensive up front, but you may save in the long-term.

5. Teach Them to Cook

Yes, really. Buying takeout every night, besides being unhealthy, can also really impact your child’s wallet. By teaching your grad to cook, they could save a lot of money on expensive take-out once they’re on their own!

Surprisingly, many people are unaware that there are privately funded student loans to help pay for college.  In short, they offer students the option of borrowing to cover the cost of education including tuition, fees, room and board as well as other related expenses.

1) www.StudentScholarshipSearch.com – Offers a free open directory of scholarships for college.

2) www.ScholarshipSearch.com – A college student membership rewards program; join, earn points, win free scholarships!

3) www.StudentLoanNetwork.com – Everything you need to know about student loans and a great overview of financial aid in general.

4) www.FinancialAidNews.com – Daily news updates on financial aid, scholarships and paying for college.

5) www.FinancialAidForum.com – A financial aid discussion board discussing all things relating to paying for college.

1. Complete the FAFSA application to qualify for federal and institutional financial aid.  Applying early will increase your eligibility for aid.  Those who wait may loose out.
2. Once you complete the FAFSA, apply for scholarships.  There are thousands of private and free scholarship programs.  Again, apply early to get the best chance of securing money for 2011.
3. Research and apply for federal student loans.  These loans are great options.  The Stafford loan has a low rate and interest as well as payments are deferred until after graduation for the “subsidized” Stafford loan.
4. Review private student loans and student loans from banks.  These loans offer some different options and may be at lower (variable) rates compared to the fixed plus loan rate.
5. Dig deep into your savings – you’ll need it…

Good luck with funding the next year of school.  The costs continue to rise.

One option, if finances become an issue for the parent, is to simply have the student reimburse the parent for the cost of the monthly payment, but continue to make the payments in the parent’s name.

If, as a parent, you would prefer a loan that allows you to eventually transfer the repayment obligation, consider a private student loan. These loans are in the student’s name, and depending on the lender, generally have a cosigner release option. After a certain number of consecutive on time payments, the parent (as a co-signer) can apply to be released from the loan, making it entirely the student’s obligation for repayment.

The Graduated Repayment Plan allows you to start out with lower monthly payments that gradually increase over time until the loan is paid in full. The required monthly payment is calculated based on your loan debt and interest rate.

The Income-Sensitive Repayment Plan bases your monthly payment on your yearly income and your loan amount. You are eligible for this plan only if you monthly loan payment is greater than ten percent of your annual gross income.

The Extended Repayment Plan provides eligible loan borrowers with payment relief through an expanded repayment term of up to 25 years.

Visit ParentPLUSLoan.com for more information on repayment, and don’t forget to consolidate if you have more than one federal loan.

Once your child has exhausted the annual maximum for Stafford loans, the next step is to look at credit-based options to bridge the financial aid gap. Fortunately for you, there are quite a few lenders that all must compete with each other to make money and therefore give you an opportunity to minimize the interest rate on a new loan.

If you’ve read a few posts on this blog, you know the score on Parent PLUS loans, but what about private student loans? There are a few notable differences… and in some cases they can become more attractive than their federal counterpart.

Major Differences:

• Private student loans have variable interest rates (meaning they change with the index they are associated with… most commonly LIBOR or the Prime)
• They come from banks instead of the Department of Education
• Many banks offer special incentives to make a private student loan more worthwhile

At the moment, interest rates are quite low due to the Fed attempting to put the economy back on a growth track out of the recession. This means that the indices are at historical lows and with a creditworthy borrower, you can secure a great interest rate that can be as much as 5% lower than a Parent PLUS loan.

If you want to learn more about some of the incentives that private lenders offer, check out this blog on the Student Loan Network.

The bottom line is just do some research before you take out a loan. In many cases, you can save thousands of dollars in interest if you shop around.