'Financing College: Where's the Money?': After the fact

This is the fifth and final in a series of articles from Penn State offering tips and information about financing a college education.

If the cost of attending college has not been paid for before enrolling or while attending a university, the final payment options occur “after the fact.”

The most obvious way to finance a college education after attending is through various loan options.

What are the loan options for students?

Student loans
The first options for student loans fall into one of two categories of federal loans — subsidized, meaning the government pays the interest while a student is in school; or unsubsidized, which accrues interest while a student is enrolled, although a student may defer payment of the interest until after graduation. Qualification for federal loans is based on financial need determined on the Free Application for Federal Student Aid (FAFSA) form. Students without demonstrated financial need may qualify for the unsubsidized federal student loan.

A student will be given a determination on whether they qualify for student loans at the same time grant awards are made. If a student needs to borrow more than the amount allowed under the federal student loan, their parent can choose a federal PLUS loan or a private loan.

Clark V. Brigger, executive director for undergraduate admissions at Penn State, colorfully illustrates today’s cost of financing a college education using student loans by comparing it to Honda’s line of automobiles.

"I would not be in my position today had I not taken those loans," Brigger said. “Back in my day, I maxed out the student loan program, which was almost the equivalent of buying a Honda Civic. Today, if one maxes out the student loan program it is similar to purchasing a Honda Accord."

Parent loans
Beyond student loans, if a family can qualify for a federal parent loan and they choose to do so, they can use this as a financing option. Parents can borrow the amount they need to pay for college costs and can begin repayment of the loan either while their student is still enrolled or they may defer the repayment until after their student ceases enrollment.

“Think of it (a federal parent loan) as a tool. Very few people can pull money out-of-pocket to meet these costs,” said Anna Griswold, assistant vice president for undergraduate education and executive director for student aid at Penn State. “What would a family do if they were making a purchase and they needed something very significant or wanted it for their family? They would, if you will, buy it on credit. That’s what an education loan is to parents.”

While student loans do not require a credit check to qualify, parents must pass a credit check in order to obtain a parent loan.

Tax credits

An often overlooked educational funding source is tax credits, which become available after each calendar year of college.  

The Internal Revenue Service’s page, titled “Reminder for Parents and Students: Check Out College Tax Credits for 2016 and Years Ahead,” details the American Opportunity Tax Credit and the Lifetime Learning Credit. These tax credits can net up to $2,500 and up to $2,000, respectively, to repay qualified education expenses — tuition, fees and other — for an eligible student.

This is the final story in this series on financing a college education. To review any of the previous stories, go to the index below:

— “Financing College: Where’s the Money?” (introduction)
— “Financing College: Where’s the Money?" – Start early
— “Financing College: Where’s the Money?" – Free money
— “Financing College: Where’s the Money?" – The campus connection

For more information on admission to Penn State and financial aid, go to http://admissions.psu.edu/costs-aid/.