The cost of a college education increases at twice the inflation rate annually or about 7% a year. Yet, for most competitive jobs today, a bachelor’s degree is required, a master’s degree preferred and doctorates are becoming common. Currently, the average annual costs, including tuition, fees, room, board, books, supplies, and other expenses were $12,294 for U.S. students attending two-year public colleges, $16,357 for students attending four-year public colleges and universities, and $33,301 for students at private four-year colleges and universities. Out-of-state students attending public colleges and universities pay an average total cost of about $26,000.
How will you pay for your college education or that of your loved ones? Unless you or your parents are independently wealthy, odds are that you’ll be using a variety of methods to pay for college. As part of our commitment to public service and educational opportunity, America.edu is proud to offer you the following information and resources designed to help you pay for college.

Here are two of the more common mechanisms for financing higher education with information related to each:

Loans

Educational loans come in several different forms and like any other loan, must be repaid with interest. Federal student loans, private student loans and parent loans are the three most common types of educational loans. The two types of Federal student loans are Stafford Loans and Perkins Loans, with Stafford Loans being much more common. Stafford Loans are subsidized (the federal government pays the interest while you're in school) or unsubsidized (you pay all the interest, though payments are deferred until after graduation). Two-thirds of subsidized Stafford Loans go to students with family incomes of under $50,000 a year, while about a quarter go to those with annual family incomes of $50,000 to $100,000. Less than 10% of subsidized Stafford Loans go to students with family incomes of more than $100,000. All students, regardless of family income or financial need, are eligible for unsubsidized Stafford Loans.

Dependent undergraduates can borrow up to $3,500 for their freshman year, $4,500 for their sophomore year, and $5,500 for each remaining year. Independent students can borrow an additional unsubsidized $4,000 the first two years and $5,000 for the remaining years. Graduate students can borrow $20,500 per year, $8,500 of which can be subsidized. There are cumulative Stafford Loan limits of $23,000 for undergraduate education and an undergraduate/graduate combined limit of $65,500. Independent students have cumulative limits of $46,000 and $138,500 respectively.
Fixed interest rates on Stafford Loans are 6.8%. The standard repayment term is 10 years and begins six months after graduation. It is important to remember that Stafford Loans carry fees, which are deducted from the disbursement check, though the Federal has begun to phase-out these fees and they’ll disappear altogether in 2010. Stafford loans can be given and administered directly from the federal government or from private lending institutions such as banks and credit unions. Perkins Loans are reserved for those with exceptional financial needs and such loans are made by the college or university from a fund given them by the federal government. Perkins Loans are always subsidized and carry interest rates that are lower than Stafford Loans – usually about 5%.
The federal Parent Loan for Undergraduate Students (PLUS) program lets parents borrow money at a fixed rate of 8.5% to cover any costs not already covered by the student's financial aid package, up to the full cost of attendance, with no cumulative limit. Graduate students can also take out this type of loan to pay for their own education. Repayment begins 60 days after funds are fully disbursed and the repayment term is up to 10 years.
There’s a basic credit check required for these loans, though eligibility is fairly liberal. Parents are encouraged to investigate all their options for financing college, including a home equity loan, which may have a better interest rate, favorable tax treatment or other benefits. Research a solution that works best for you and talk to an accountant/financial planner.

Scholarships/Fellowships

Scholarships and fellowships are forms of financial assistance that unlike student loans, do not have to be repaid. More than one million scholarships and fellowships are awarded each year totaling almost $3 billion. Hundreds of thousands of scholarships and fellowships go unclaimed each year simply because nobody applies! Federal, state and local governments offer scholarships, as do corporations of all types and sizes, foundations, civic organizations, and individuals. Most scholarships and fellowship opportunities go to students with demonstrated academic performance, athletic skills or artistic talents, though thousands of awards are also available for students who are interested in particular fields of study, who are members of underrepresented groups, who live in certain communities and/or who demonstrate financial need. Your chances of getting a scholarship or fellowship are greater than you think; apply now!