The president of Iowa Student Loan says college students and parents should be planning right now on how they are going to pay for college in the fall. Steve McCullough says start by looking for sources of money that aren’t loans.
“First of all, take any scholarships or grants that the college can get for you because you don’t have to repay those,” McCullough says. “If you don’t have enough money after that — students should go ahead borrow on their own through the Federal Direct Loan Program for students — because those are the lowest cost loans.” He says loans should be your last choice.
“Before they look at any loans, they should look to see if they’ve got savings available that they could use or even current income that they could use to avoid borrowing,” according to McCullough. “Iowa Student Loan, we are non-profit and part of our missions is to get people to borrow as little as possible, so we have some really good tools on our website that talk to people about their alternatives.” McCullough says some people will end up having to take out loans. He says the cost of borrowing for parents has recently gone up.
He says the Federal Direct PLUS loan interest rate for parents has gone up to 7.60% with a 4.26% up-front fee. “So, that’s relatively high and higher than people would expect for a federal loan.”
He says his organization offers a lower rate. “Our rates are currently 6.30% with no up-front fee if people start paying immediately 7.22% if they elect to defer payment until their student graduates. So, it’s a unique circumstance where the state-based program is actually less expensive than the federal program,” McCullough says.
You can find out more at: www.IowaStudentLoan.org.