Good News For College Loans

President Bush signs law increasing access to federal funds

can be as much as $7,500.

3) Approach private lenders with care. At some colleges, students can borrow directly from the federal government. If your child’s school is not in this program, he or she can go to a private lender for a federally backed loan. “The same banks that offer federal loans may have their own education loans, which are not
guaranteed by the government,” says Deborah Fox, who heads Fox College Funding in San Diego. These private loans may have variable interest rates that are as high as credit card rates. What’s more, Fox says that many borrowers are misled into thinking they have federal loans when they really have signed up for pricey private loans.

“Federal loans require the student or parent to sign a master promissory note, and the documents will clearly indicate at the top that it is a federal loan.”

4) Bear parental responsibility. If federal loans won’t pay the full cost of college, bridge the gap with PLUS loans; this can supplement the student’s financial aid package up to the full cost of attendance. PLUS loans are part of the federal program. They usually are taken out by students’ parents, who’ll pay a fixed interest rate of 8.5%. The new law allows parents to defer repayment of PLUS loans until after their child graduates, providing some relief from paying steep college bills.

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