When federal student aid, scholarships and personal savings aren’t enough to cover four or more years of tuition, room and board, you may have to look for other ways to fill the financial gap. For some students, that may mean choosing a less expensive school or scaling back expected expenses. For other families, it may be time to apply for loans and lines of credit. Whatever you do, don’t panic. Get help from an RBC Bank representative or financial advisor so you can explore all the possible options and protect your financial future.
Apply for Loans
Student loans are usually a last resort for families with college-bound students, but they can actually be comparatively affordable options. Even people who long ago earmarked investments to pay for their child’s college education may decide to get loans. Well-performing investments may earn more than a loan costs, so let them keep growing while you borrow just enough to cover your shorter-term financial need.
- Sallie Mae Smart Option Student Loan®: RBC Bank offers the Smart Option Student Loan to students who still have financial needs after maximizing grants, scholarship and federal loans. This may be the best available option for creditworthy parents who are willing to cosign a loan with their student. Students can get a lower interest rate thanks to parents’ creditworthiness while also building their own credit.
While a student is still in school and for the six months after school, the only repayment required is loan interest. After graduation, a student can release their cosigner and complete repayment of their loan.
- Home Equity Loan: By leveraging the equity you’ve built in your home, you can get a low interest rate loan to help pay for college, and the interest you do pay may be tax deductible.1 RBC Bank home equity loans start at a $5,000 minimum.2 You’ll get a check for the full loan amount right away and then you’ll have a schedule of fixed monthly payments over a fixed term to pay it back.
- Home Equity Line of Credit: Even if you think you’ve got tuition covered, having a home equity line of credit can be a great resource to help cover unexpected expenses.3 With a line of credit at the ready, you can leverage the equity in your home to easily help your homesick child come home for a visit or cover the extra cost of a semester abroad. Just write a check when you need extra cash then pay it back using flexible terms. Like home equity loans, the interest you pay on a home equity line of credit may be tax deductible.4
- Federal Government Loan: The federal government offers several loan programs to help pay for post-secondary education. The Stafford and Perkins loans are available directly to students, and the P.L.U.S. loan is designed specifically for parents of college students. Some of these loans may be subsidized, which reduces or eliminates the interest you pay on the loan.
If you and your student would like to avoid borrowing money, there are many ways to pursue a college education for less.
- Pay less at community colleges. Students can spend a year or two getting core class requirements out of the way before transferring to a more expensive four-year school.
- Choose a less expensive school. When a child attends a school in the state where you’ve established residency, tuition usually costs less compared to an out-of-state school. Also, public universities will cost less than private colleges.
- Keep them at home. If you live near a college or university, invite your child to live at home for a while to save on living expenses. As an incentive, consider offering to pay first month’s rent and security deposit for an apartment when he/she is ready to move out in a year or two.
- Investigate cooperative education programs. These employment programs let students alternate between studying full time and working full time. Programs aren’t based on financial need, and students can end up earning as much as $7,000 in a year.
- Pay for fewer credits or semesters. Students can earn college credits while still in high school by taking advanced placement (AP) courses or passing College-Level Examination Program (CLEP) tests. As a result, students may earn a degree in fewer semesters or be more likely to graduate on time.
- Maximize course loads. Full-time students pay a flat rate that covers anywhere from 3-6 courses a semester. Students who take only the minimum number of courses will end up spending extra semesters in school. Depending on a student’s extracurricular activities and work requirements, it may cost less to fit more classes in fewer semesters.
- Join ROTC. Students who participate in ROTC earn monthly stipends and get scholarships that pay all tuition fees and textbook costs. In return, students must agree to active service after graduation.
There are many options to help you realistically finance a college education for your child. Whatever you do, don’t panic and drain your 401(k) or other retirement funds. The penalties you’ll pay and the savings you’ll lose aren’t worth it, especially with so many other options to consider. If you have to dip into retirement savings, see if you have a Roth IRA. It has provisions that will let you use funds for educational expenses without paying steep penalties or a lot of taxes.
Similarly, don’t put yourself in such an economic bind that you’re using a credit card to pay for everyday living expenses. Most credit cards come with especially high interest rates, and if you can’t pay off the balance, the interest rate and penalty fees climb even higher.
As you add up possible expenses, keep the main objective in mind. A good education is well worth the expense, as you can see with our Value of Higher Education calculator.
If you need help financing a child’s college education, RBC Bank can help.
Visit your nearest RBC Bank banking center today or call 1-877-RBC BANK (877-722-2265) to learn which options may work best for you.