Attending college is an expensive proposition. Some families set up college funds while their children are young, but many do not. Fortunately, help is available from many sources, one of which is the federal government.

Federal student aid helps lots of students who otherwise wouldn’t be able to pursue higher education each year. Anyone can apply, and assistance is based on family income and assets. You don’t have to be at the top of your class to get help like you do with most scholarships.

In order to receive education assistance from the government, one must submit a Free Application for Federal Student Aid, or FAFSA for short. This form asks questions about the student’s income, assets and debts, or those of the parents if the student is a dependent. Applicants must also answer questions about family size and number of family members in college.

The FAFSA may be filled out online, or students can obtain paper forms from their schools. There are lots of questions, but the answers to most can be found on income tax forms from the prior year. Many schools hold free workshops to assist students and parents who need help filling out the FAFSA, so there should be no cost whatsoever in applying for student aid.


What Happens After You File

Once your FAFSA is filed, the government calculates your expected family contribution (EFC). This is the amount that they determine you and/or your family are able to pay toward your education. You will receive a Student Aid Report that contains this information a few weeks after filing.

When filing a FAFSA, you should specify which colleges you are considering so that they will also receive a copy of your report. Upon receipt of your report, the college’s student aid office will put together a financial aid package for you. The package may include grants, work-study opportunities and loans from the federal government. Individual schools may also offer financial aid from private programs based on your Student Aid Report.

Some types of federal aid have special requirements. Some require a GPA of 3.0 or higher. Others are only available to first or second year college students or those pursuing certain majors. Many have no special requirements, but you must be a U.S. citizen or eligible non-citizen with a valid Social Security Number in most cases to receive any type of federal aid. More info, check out
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Federal aid can put college within reach for most students. But it’s important to file your FAFSA as early as possible, because schools distribute federal funds on a first-come, first-served basis. Also, keep in mind that you must file a new FAFSA each year to continue receiving aid.

Having help from friends and family can reduce the burden of saving for college. In the past, it was difficult for others to make contributions specifically for college expenses. They usually had to send cash or a check and hope that it would go toward college. But with the Freshman Fund, making such a contribution has become much simpler.

The Freshman Fund is a company that facilitates contributions into 529 college savings plans. Parents can create an account for a child and notify friends and family members. When they want to make a contribution, they can easily do so online. Funds are then put into a designated 529 account. If the parents have not yet opened such an account, funds are held in an interest-free account until they do so.

Those who wish to send a gift of college savings can do so even if the recipient doesn’t have a Freshman Fund account. Gift certificates may be sent to anyone with an email address. The recipient can redeem the certificate into any 529 plan. This is a wonderful way to encourage those you care about to start saving for college, and it ensures that the money will not be spent on something else.

College Money for Birthdays and Holidays


More and more parents are opting to discourage traditional gift giving for holidays and birthdays. It seems that most of the gifts end up collecting dust, wasting space and eventually cluttering up landfills. Encouraging friends and family to give money for college is much more practical, especially considering that their gifts will draw interest until your child pursues higher education.

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Freshman Fund users can send email notifications to others to let them know how they can make a contribution. They could also add links to the account to birthday party invitations. These are great ways to encourage contributions as an alternative to the usual kinds of gifts.

A 529 plan can help you save the money your kids will need for a college education. And now, it’s easier than it has ever been for people outside the immediate family to pitch in. When combined with family contributions, Freshman Fund contributions can really add up. By the time your child is old enough to go to college, he could feasibly have enough money to pay for tuition, fees and other allowable expenses with little or no outside help.

Formerly known as an Education Individual Retirement Account, the Coverdell ESA does have some things in common with IRAs. Contributions are not tax-exempt, but interest is as long as the funds are used for education. Account owners can choose from a variety of investment strategies, including stocks, bonds and mutual funds, and may make adjustments to these investments periodically.

A Coverdell ESA may be set up for anyone under the age of 18. Contributions may be made until the same age. All contributions must be in the form of cash, but cash contributions from corporations are permissible.


One of the most attractive aspects of the Coverdell ESA is that the proceeds can be used for any level of education. Unlike 529 plans that may only be used for college, Coverdell ESA funds may be withdrawn without penalty to use for elementary or secondary education as well. The money may be put toward tuition, fees, books, supplies and required equipment. Those who are enrolled at least half time may also use the funds to pay for room and board.

There are certain restrictions imposed on Coverdell ESAs. One of the most important is the $2,000 yearly contribution limit per beneficiary. There is no limit to the number of Coverdell accounts that may be set up for one beneficiary, but contributions across all such accounts can still be no more than $2,000 per year. Contributors with an adjusted gross income of over $95,000 may not contribute the full amount.

Another thing it’s important to remember is that all funds must be withdrawn by the beneficiary’s 30th birthday. The only exception to this rule is for special needs students, for whom there is no age limit. If the funds for a non-special needs student are not used by the time he turns 30, they must be rolled over into an ESA for another family member to avoid taxes and penalties.

Coverdell ESAs have an effect on financial aid eligibility. The effect is largest when the account is owned by a student who is not a dependent, but the account is also considered to a lesser extent if it is owned by a parent or a dependent student. Withdrawals may be limited if claiming a Hope Scholarship or Lifetime Learning tax credit in the same year.

A Coverdell ESA is great for saving for any level of education. While it may not pay for the entire cost of college, its benefits make it a good choice for most families. A Coverdell ESA can be used in conjunction with a 529 plan or other investment vehicle, so you can still save up a great deal of money.

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Actually, we can. It’s called a 529 plan, and it offers the opportunity to save up for higher education without forfeiting a percentage of the interest earned to the government. Named from Section 529 of the Internal Revenue Code, 529 plans have only recently become well known. But their tax advantages have led to a boom in popularity, and they are currently one of the top methods of saving for college. Read about the explanation of 529 plans.

The 529 plan offers a number of tax advantages. These include the following:


* Contributions may be deducted from state income tax in many states. This can reduce one’s state tax liability each year.

* Interest accrued in a 529 plan is tax-deferred. Early distributions and withdrawals that are not used for education expenses may be subject to taxes and penalties. But if the funds are used strictly for the higher education of the beneficiary, they are exempt from both federal and state taxes.

* Most states have high maximums for contributions to a 529 plan. Some allow for contributions of as much as $300,000 per beneficiary. That allows for a significant amount of interest to accrue tax-free.

* A 529 plan can be useful in estate planning. The assets in the plan are not counted as part of the owner’s estate, yet they can be reclaimed at any time. Reclaiming the assets usually results in income tax and penalties, but the estate tax may be reduced without using the money for education in some cases.

* In the event that a 529 account loses value, the funds may be withdrawn and the losses deducted from taxes.

Other Advantages

In addition to tax advantages, 529 plans are advantageous in several other ways. These include:

* All investments are handled by the program manager. All the plan owner has to do is choose the type of investment he wants to pursue and make contributions. The rest is taken care of by knowledgeable investors.

* A 529 plan can be set up so that it does not affect eligibility for financial aid. Accounts owned by students and parents can hurt eligibility, but if the account is set up by a grandparent or other individual, the amount is not considered in figuring the family contribution.

* Prepaid tuition plans are often backed by the state. This means that they cannot lose value.

A 529 plan can be used to ensure that your child has the opportunity to go to college. And unlike many other investments, its interest is not subject to taxes. If you’re looking for a way to save for education without losing a portion of the interest gained, a 529 might be the plan for you. For more info, check out StudentLoanMentor.

You could stuff it in a sock drawer, but it would have no chance of drawing interest there. A savings account might be slightly better, but any interest earned would be taxed. A 529 plan is a much better option.

529 plans are similar to 401K plans, but they’re for higher education instead of college. Parents, grandparents or anyone else can put money into one for a specified beneficiary. Any interest earned is tax-deferred, and if the money is left in the account until the child goes to college and used for college expenses, there is no tax liability.

There are two basic types of 529 plans. The College Savings Plan is the most similar to a 401K. Investors are allowed to choose from a variety of investment options for the plan, and their money earns interest according to the investments’ performance. The Prepaid Tuition Plan is different in that it allows contributors to purchase tuition credits at current prices to use in the future.


Most 529 plans are run by states. Every state offers at least one plan. Each plan is different, but most require either the plan owner or beneficiary to be a resident of the state issuing the plan. Some allow residents of any state to invest, but out-of-state residents may not be eligible for all available tax benefits. In most cases, the funds from state-run plans may be used at any college or university, even if it is not located in the same state.

There are also 529 plans offered by colleges and universities. All plans offered by educational institutions are prepaid tuition plans. Unlike state-run prepaid tuition plans, however, those run by schools are not guaranteed by the government.

The funds withdrawn from a 529 plan must be used toward eligible expenses. With prepaid tuition plans, these generally include only tuition and mandatory fees. Some plans, however, offer an option to purchase room and board credits or use extra tuition credits for these expenses. Money withdrawn from college savings plans may be used for tuition, fees, books, computers and room and board.

A 529 plan can help you save money for education without incurring a huge tax bill. These plans are easy to set up, and all of the investing is taken care of for you. All you need to do is make contributions and make sure that the beneficiary uses the funds properly when the time comes. More Info, check out: StudentLoansMentor

The trouble is, college is quite expensive. Earning a bachelor’s degree costs many thousands of dollars. This is why many students turn to student loans. There is no interest charged while you’re in school, and you do not have to start repaying the loan until you graduate. Still, it’s important to carefully consider a student loan before making a commitment.

The Alternatives


If you truly can’t afford college, you can usually get funds that do not have to be paid back. Even if you don’t think you will qualify due to your family income, it’s a good idea to apply for federal student aid. Applying is free, and you might be surprised to learn that you do in fact qualify for some assistance. This aid may not pay all of your expenses, but it can be a big help.

It’s also smart to apply for scholarships. There are scholarships out there for all types of students, not just those at the head of the class. Scholarships are offered for those participating in sports, theatre, clubs and more. Some scholarships are awarded for winning competitions, so it doesn’t matter what kind of student you are.

Federal aid and scholarships can greatly offset the costs of a college education. They can reduce the need for student loans, or possibly even eliminate it.

Disadvantages of Student Loans

Student loans can help us get the education we need to succeed, but they are not without drawbacks. One of the most significant is the time it can take to pay them off. You may end up making payments for decades depending on how much you borrowed. This can make it more difficult to afford the things you want and need in life.

Another drawback is the fact that you may or may not be able to get a job in your field immediately after graduation. Even if you do not get a job right away, you are still obligated to start paying back your loan. If you don’t, it could damage your credit and your wages could be garnished when you do go to work.

Defaulting on student loans can make your life much more difficult. Employers who run credit checks on prospective employees may pass you over if they see you have defaulted. Such a default will remain on your credit history indefinitely, and student loan debt usually cannot be discharged by bankruptcy.

If you find that you need a student loan, try to get one that is backed by the government. Government-backed loans usually have low fixed interest rates and more flexibility in repayment than private student loans. No matter what type of student loan you get, paying it back should be a top priority in your budget. The quicker you can repay it in full, the more you will be able to enjoy the increased income your education brings.

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Few people go through their entire lives without incurring some type of debt. When you go in debt, it’s important to know your rights and obligations. These rights and obligations vary according to the type of debt contract you enter into.

By definition, a contract is the exchange of promises between two people. This can take on many forms. When it comes to debt, there are four basic types of contracts:

* Oral contract – This type of debt contract has been around since the beginning of time. It simply involves one person lending another person money, and the borrower agreeing to repay that money. Nothing is put in writing.

Oral contracts are legally binding. The problem with them is that they are more difficult to enforce. This is due to the fact that there is no written proof of them. There may not even be any witnesses to the agreement except for the two parties. Due to these factors, it may be difficult for the creditor to collect.

* Written contract – A written contract may be as simple as an agreement written on a piece of notebook paper, or as complex as a multi-page document. When a loan is involved, the terms are defined and the contract is signed by the creditor and the debtor. This type of contract usually holds up well in court, even if it is created informally.

* Promissory note – A promissory note is very similar to a written contract, but there is an important difference. In a promissory note, the payment schedule and amount of interest charged are spelled out. Promissory notes are rarely informal agreements. Examples include mortgages and auto loans.

* Open-ended accounts – An open-ended account usually does not require a traditional contract. It is a revolving line of credit in which the balance varies. The most recognizable example is a credit card.

The category under which a given debt contract falls may sometimes be confusing. Oral contracts are easily identifiable as such, but there is often confusion about the subtle differences between a written contract and a promissory note. Credit cards are open-ended accounts, but there have been cases in which creditors have attempted to enforce them as written contracts. But in the absence of an actual written agreement, this would not hold up in court.

No matter what type of debt contract you enter into, it’s important to read it carefully. No matter how reputable the creditor may be, it’s essential to know the terms to which you’re agreeing before you sign anything. It’s also a good idea to familiarize yourself with the laws governing the different types of debt contracts. If you need assistance, an experienced consumer rights attorney can help.

For example, an undergraduate may receive up to $4000 per year (maximum total $20,000), while a graduate may receive up to $6000 per year (maximum total $40,000).  There are conditions, however.  The amount received depends upon financial need, if any other aid is given, and if the funds are actually available through the college.

It is important that a student does not borrow more than he or she needs.  Tuition, housing (if applicable), books, and incidentals are the important items for a student to consider when applying for a loan.

If you borrow more than is needed, that is more that you will have to pay back, especially if you have applied for an unsubsidized loan.  Think of the interest accrued!

The financial aid office will give the student the maximum amount he or she qualifies for.  That doesn’t mean that utilizing the entire amount is appropriate.  Also keep in mind that some loans have fees, such as the Stafford Loan.  These fees will be deducted from the loan before a check is forwarded to the college.

The best way to determine how much you need is to visit the college website and/or visit the college in person and make notes of approximately how much it will cost per year.  Once you have this information, apply for the loan as soon as you are accepted.

Make an annual checklist of expenditures so that you can keep a running record of how much you spend per year.  If you need to borrow additional funds, speak to the financial aid counselor to determine what type of loan you need and qualify for.

Keep in mind, too, that applying for an additional unsubsidized loan will require that you make interest payments while attending college.  This will cost less in the long run than letting the interest accumulate and paying a hefty sum after you graduate.

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As some of us know, having bad credit can ruin our ability to obtain loans to buy a car or acquire any credit without paying exorbitant interest rates.  Applying for a student loan while having bad credit, particularly these days, is even tougher than before the recession.

Here are some tips that apply not only to student loans, but general credit as well:

* Check your credit report annually.  Ensure there are no questionable debts.

* Check your FICO score with the three agencies as well.  Today, you need a minimum FICO score of 720 in order to obtain a low-interest rate loan.

* Pay down as much debt as possible.  Use the “snowball” method.  Start with the highest interest rate credit card first.  Pay more than the minimum until it is paid off, then use that money to pay the next credit card and so on.

* Ask your boss if you can work overtime.  If not, apply for a second part-time job.

* Apply for a government loan such as a Stafford loan.  In lieu of this, speak to the financial aid counselor at the college or university your son or daughter will be attending to determine why type of financial aid you do qualify for.

In addition, if you are a student who needs financial assistance, ask your parents if they will co-sign a bank loan.  If they have great credit, there shouldn’t be a problem.

Although many banks today are not lending, there are many exceptions where they will authorize a loan for borrowers with bad credit based on a higher rate of interest.  Some lenders will even utilize student scores as criteria for approving a student loan.

Apply for all federal loans to ascertain what loans are approved under these conditions.  Check with Sallie Mae and the Perkins Loan as well.

In today’s economy, steps are being taken by the administration to make student loans more accessible.  Stay focused on the latest news regarding Federal loans by bookmarking the website of many of these government-initiated loans.

Learn more from StudentLoansMentor today.