How to Save for College: The Argument Against Federal Loans

You have likely heard federal loans for college are easy to get and very inexpensive. While these loans may be easier to secure and less expensive than private loans, there are still a number of drawbacks to taking federal loans for college. You will have to pay interest on the debt, increasing the cost of education. If you do not pay the loans off fast enough, you will end up carrying a high amount of what is considered senior debt, meaning it can affect your ability to get other loans. Ultimately, if you can save money for college, you will reduce the expense of school and protect your financial stability in the future.

Pay Yourself First

If you plan on working prior to entering college, whether this is during your high school years or after, you should learn the value of saving immediately. The term "pay yourself first" simply means taking a portion of each paycheck and putting it immediately into a savings account. Instead of thinking of all of your money as cash to be spent, reduce your liquidity but save for your future by making regular savings contributions a part of your routine.

Set Up College Savings Funds

Your money can grow faster, while in savings, if it is invested properly. You can elect college savings accounts through local banks or investment houses. These accounts may even be tax deferred or tax deductible depending on how they are structured. Consider CDs or mutual funds. These options can hold your money on lock, preventing you from giving into the temptation to dip into your college savings when you would like a little extra cash. As relatives to contribute to these accounts as gifts for birthdays or holidays instead of simply buying you presents. You will thank yourself in the long run for your forward-thinking responsibility.

Take Mini Loans

With the cost of education today, it is unlikely you will be able to save up enough money to entire cover the cost of going to school without taking at least a small loan. When the time comes to take your education loan, you will benefit with lower interest rates and better terms if you have built up your credit history. Do this by taking small personal loans where possible, such as for an automobile or on a low limit credit card. Managing your credit from an early age will give you an advantage when you seek loans later.

Seek Local Grants

Local grants can fill in gaps in your savings. Grants are preferable to loans because they never need to be paid back. You may be surprised to find a number of local organizations will offer grants to students regardless of their need. Your high school, church, or a local non profit organization can be of assistance. Gaining even a few thousand dollars in grants will help you cover costs like books, room and board and other necessities. You will have to take less debt when you do finally enter college.


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