There’s never a great time to receive a tuition bill- for the fall semester, it’s usually due in the summer and for the spring semester it’s usually due before the holidays. Most of us could think of other expenses during the summer and holidays that we would like to spend money on than the college tuition bill. Since there’s never a great time to receive a usually high bill, it’s important we spend the time before getting the bill to determine the best payment strategy for your family.
Although schools will bill per semester, it’s recommended that you think about the full academic year and not just the semester at hand. Approaching your bill payment with this strategy can save you time, and reduce stress, later.
There are three sources of income to pay for your tuition bill- past savings, present income and future income (loans). When paying your tuition bill, you can opt to use one or all of these sources. One of the key steps in paying the tuition bill is identifying who is paying the bill. In some situations, the student takes on 100% of the college costs, in others family and student take on the cost together. As we go through the following options, keep in mind multiple people could be involved in the process and it’s best to have a candid conversation than make assumptions regarding who and how much will be contributed towards the student’s tuition bill.
Past Income- Savings
For some of you, you may have college savings that you can utilize to pay the tuition bill. Perhaps money in a 529, Coverdell, or other type of savings account. If that is the case, what is your strategy? Will you use all the savings for one semester, one year or all years? Your savings vehicle, interest rate earned and other factors can impact when to use savings- contact your savings company to get more specifics as to what your options may be.
Present Income- Payment Plans
With the cost of education being high, most colleges understand that not everyone is able to make a one-time payment on the due date. If that isn’t an option for you, but you have the ability in your monthly budget to absorb a tuition payment, a payment plan may be the best option for you. With a payment plan, you can opt to pay the tuition bill over a set period of months. Payment plans are typically managed either by the school or an outside party, and may have a fee associated with it- however, the fee is often less than interest rates charged on loans.
Future Income- Education Loans
Education loans borrowed by the student and family are the most common way to pay for a large tuition bill. However, educational loan rates, benefits and repayment can vary greatly based off lender and borrower. Federal student loans tend to have lower rates and are the best option for students to borrow before seeking private student loans. Details about the federal student loans can be found at studentaid.gov.
Private student loans (which are loans outside of the federal government) will usually require for the student to have a co-signer or the parent or family member may borrow without the student. Educational loans typically will not require payment while the student is enrolled, but may require payment within 6 months of graduating. However, some educational loans may require payment as soon as the school receives the funds.
If you are borrowing a student loan, having a good credit score will be helpful. You can review HUECU’s education loans at huecu.org/education-loans.