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Sources used to prepare this article include:

Borrowing for College

Education loans to students and/or parents are available from government and private sources.

Federal Loans

Federal Stafford Loans are made to undergraduate and graduate students attending accredited schools at least half-time. Payments usually begin six months after the student leaves school. Those with financial need receive subsidized loans, meaning the government pays the interest while the student is in school. In a standard Stafford Loan, recipients are charged interest from the time the loan is issued.

Federal PLUS Loans are made to parents with good credit, who may finance up to the full cost of educating each dependent attending an accredited school at least half-time. No demonstration of financial need is necessary.

(Note: Stafford and PLUS loans are available under two programs, one in which funds come directly from the U.S. Department of Education and the other in which the money comes from a bank or other lender. The loan characteristics are essentially the same. However, repayment options vary.)

Federal Perkins Loans are low-interest federal loans made through colleges to students with exceptional financial need.

Other Loans

Banks, credit unions and other financial institutions offer private loan programs with varying criteria. But choose your loan and lender carefully.

Some colleges and universities offer institutional loans, with eligibility established by each institution.

Home equity loans or lines of credit can be an important source of college funding for homeowners because the interest is usually tax-deductible.

Some life insurance policies accumulate cash value that can be drawn down to pay for college. However, withdrawals may be taxable.

Some company retirement funds let you withdraw money or take loans for education. Check with your employer to see if your 401(k) plan includes this feature.

Can You Afford the Payments?

Before you decide to apply for a loan, be sure you can afford it.

This parent loan advisor estimates the amount of educational debt you can afford, given your current salary and other obligations.

Students need to understand what their monthly payments will be after graduation. Compute it here. And here are some tips for coping with payback time.

Managing Loans

Keep complete records of all your education loan information, including copies of all your loan documents, notes on telephone conversations and records of payments. Include your loan account number in all correspondence with your lender and on all payment checks.

It is possible that your loan will be sold to another lender, and you will need to stay up-to-date on any changes in the administration of your loan.

© Copyright 1996 The Washington Post Company

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