Paying for College: Where to Look Beyond Federal Loans
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What is the main topic discussed in this episode?
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Here's your Money Briefing for Friday, May 7th. I'm J.R.
Why are so many students rethinking how to pay for college now?
Whelan for The Wall Street Journal.
One of the issues that people have is they don't know that they should be looking or they don't know where to look. And that means a lot of money is potentially left on the table.
Coming up, our contributor Cheryl Winokur-Munk will go over some of the overlooked options from alternative loans to scholarships and more. That's after the break.
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We've discussed the rising cost of higher education on the show a lot, and we've talked about ways of making it more affordable, like federal loans. But there are plenty of other options that a lot of people don't think to look into. Cheryl Winokur-Monk wrote about this for the journal, and she's with us to discuss. Cheryl, thanks for being here. It's nice to be here. So Cheryl, there was a recent survey showing that about three-quarters of high school graduates and high school-aged teens said they need to rethink how they're going to pay for higher education. And many even say they're going to have to delay going to college because of it. These numbers are eye-popping. Why are they so high?
It's really not a surprise that people have a hard time paying for college these days because college costs really continue to skyrocket. In 2019 and 2020, for example, families spent an average of $30,017 on college. And that's according to Sallie Mae. And the comparison is in 2018, 2019, they spent $26,266. So you can see there's a jump just there. And you would expect with everything else going up that prices would again rise and continue to rise.
How do federal student loans differ from parent PLUS loans?
And when you join that with the fact that many families are out of work or have suffered economic hardships because of the pandemic, it just really exacerbates the problem.
All right, so let's look at some of the ways that families and students can offset those costs. Federal student loans are widely available, but there are different kinds of loans. There are student loans, of course, but also parent loans. Can you walk us through the differences?
Well, it's really who owns the loan. So a student loan, like it sounds, is owned by the student. So the student's responsible for paying that back. The parent loan is in the parent's name, and the parent is responsible for paying it back. Now, there's nothing saying that if a student takes out a student loan, that the parent can't pay it back on the student's behalf. But it does mean that if the parent doesn't do that, the student is responsible. There are differences in interest rates, and there are differences in fees on these loans. And the parents and the students have to decide who wants to be responsible for the debt. That's really one of the considerations that should go into it.
Then another type of a loan is a private loan, and that doesn't come with all the protections that federal loans do. But what are the benefits of private loans?
Well, if you have good credit, especially, you may be able to get a lower interest rate than in a federal student loan.
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Chapters
6 chapters
1
What is the main topic discussed in this episode?
0:00–0:38
2
Why are so many students rethinking how to pay for college now?
0:38–2:49
3
How do federal student loans differ from parent PLUS loans?
2:49–4:32
4
What are the potential benefits and risks of private student loans?
4:32–6:18
5
How do home equity loans and HELOCs work as college funding options?
6:18–8:21
6
Where can students find often-overlooked third-party scholarships?
8:21–8:58
Speakers
2 identifiedMore from WSJ Your Money Briefing
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