August 2011 - Eventful Magazine

August 2011 - Eventful Magazine

Gaining acceptance to a university is a

long and exhausting process, but bigger challenges

await. More daunting for most, given

ongoing increases in tuition and other costs,

is how to pay for it all. If loans are required

to help cover costs, the issue can linger for

years — even decades — after graduation.

It’s important to go into the process knowing

what to expect.

Applying for Aid

The starting point for those who expect to

need financial help is to go online and fill out

the government’s primary financial aid application,

referred to as the FAFSA (visit www There you can find out about

filing deadlines, aid options and requirements,

and how to complete the actual application.

The FAFSA process must be completed

in order to obtain federal student loans or

grants and participate in federally funded

work-study programs. FAFSA application

information is also sometimes used for the

decision process at the state and institutional

level and even to qualify for certain sources

of private financial aid.

While family income will have an impact

on determining eligibility for financial aid, it

is not the only factor. Most families, regardless

of income level, should go through the

FAFSA process at least once to see what type

of aid may be available. It’s the best way to

ensure that all sources of potential support

are explored.

Saving in Advance

Be prepared to learn that most of the aid

available may be in the form of loans. Loans

are helpful, but require repayment, often after

college days are done. The smaller the debt

load for new graduates, particularly in a challenging

job environment, the better. Having

money set aside in a savings plan can make a

big difference in the debt load required.

Parents should start saving early for their

children, if possible. But even if college days



with Joseph Madio

Providing Solutions for a Lifetime

Paying For College

and Paying It Back

are soon approaching, getting any kind of

head start on tuition can be beneficial. One

of the most popular vehicles available is a 529

college savings plan. It allows families to save

a significant sum of money in an account designed

specifically for college funding. If proceeds

are used to pay for qualifying higher

education expenses such as tuition, books,

room and board, all earnings accumulated in

the account grow on a tax-free basis. These

529 plans may be one of the most effective

means of saving for college because of the tax

benefits and because parents, grandparents

and others can contribute on behalf of specific


College is Done —

Now What?

Once an individual graduates, leaves

school or drops below half-time enrollment,

a grace period begins before repayment of

loans kicks in. The timing depends on the

loan program from which you borrowed.

For Federal Stafford Loans (Direct Loan Program

or Federal Family Education Loan), the

grace period is six months before the first repayment

is due. For Federal Perkins Loans,

the grace period extends to nine months.

Terms are different for loans categorized as

PLUS Loans. The repayment period begins

on the date the loan is fully disbursed, and

the first payment is due within 60 days of the

final disbursement. Graduate students have

more flexibility. There are situations where

deferments can be requested for economic

hardship or for some participating in military


Different loan repayment plans are available;

typically, individuals have the option to

adjust repayment terms based on their own

circumstances. The options include:

• Standard Repayment — Most students

repay their loans with generally equal

monthly payments over a 10-year period.

• Extended Repayment — Payments can

be extended up to 25 years in some circumstances.

• Graduated Repayment — Payments

gradually increase, a plan that some prefer

under the assumption that their income will

increase over time as well.

• Income-Contingent Repayment — The

repayment amount is specifically tied to income,

which also can allow for a longer repayment


Recent legislation will require borrowers

who take out a federal student loan after July

1, 2014, to make payments equal to no more

than 10 percent of discretionary income. After

20 years, any remaining debt will be forgiven.

For many graduates, student loans are the

first significant long-term debt they carry. It

is critical to be diligent about making payments

on time in order to maintain and

improve a personal credit rating for future

borrowing needs, such as a car loan or home


The above article is by:

Joseph A Madio

Ameriprise Financial Advisor

Jared Cohen & Associates

200 Business Park Drive, Suite 308, Armonk, NY 10541

914-730-1010 x13

Providing Solutions for a Lifetime

Call today for a complementary consultation to plan for your future!

I’ll help you analyze where you are today, help you clarify where you want to be in retirement, then collaborate

with you to develop a financial plan tailored to your goal of an ever increasing level of financial

independence. We’ll navigate toward a point where employment may become optional – freeing you up to

choose a new career path, lend your knowledge and experience to a non-profit or simply pursue your dreams.

You work hard for your money. I’ll develop strategies to help ensure it’s working hard for you by focusing on

your needs. Many of my clients are concerned about their financial future. Working together, we can design

and implement a personalized financial plan that helps you feel confident and optimistic.

Advisor is licensed/registered to do business with U.S. residents only in the states of NY, CT, NJ, PA, NC,


Brokerage, investment and financial advisory services are made available through Ameriprise Financial

Services, Inc. Member FINRA and SIPC. Some products and services may not be available in all jurisdictions

or to all clients.

© 2011 Ameriprise Financial, Inc. All rights reserved.

14 Eventful Magazine - August 2011

More magazines by this user
Similar magazines