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Tips to stretch student loan

Updated: May 3, 2013 12:14PM

The acceptance letter arrived in the mail. Along with it came the financial aid offer. It wasn't nearly enough!

That's the scenario in many families with high school seniors. The excitement of the acceptance is tempered by the reality that college costs a lot more than many families can afford.

Here are some tips for filling the gap.

Is college worth it? There's no question that a college education will be even more important in the years ahead. Take a step back

But when you consider the ongoing cost burdens for both family and student, it might be wise to step back and consider the alternatives -- including two years at a community college, or the in-state university versus the prestigious private school.

On the other hand, many expensive private schools have large endowments, and are in a position to give substantial financial aid to students they want to attract.

The only way to find the best deal is to apply for aid, compare the offers, and perhaps to try to negotiate for more money.

Compare financial aid offers by checking out some Web sites. is the Web site of the Pennsylvania Higher Education Assistance Agency. It helps you compare financial aid offers from various colleges and universities. Just click on the home page tab that says "Deciding" and then on "Award Analyzer."

Basically, this is a free, simple spreadsheet that displays the awards side-by-side. It will help you organize your thoughts, as well as your money. offers more sophisticated comparisons and advice for $59 from college adviser Paul Wrubel. He notes that many schools include PLUS loans as part of their aid package to make their offer look more attractive, even though PLUS loans are made to parents, and are made to anyone, regardless of need. Wrubel advises a polite approach to asking for more aid, but says it's worth trying.

Remember that not all federal student loans are equal. If you haven't read the headlines lately, you might not be aware that even though federal student loans carry the same name -- typically Stafford Loans, PLUS loans and GradPLUS loans -- they do not necessarily carry the same interest rates. The 6.8 percent rate on Stafford loans is only a government-set maximum -- albeit a rate that most lenders charge.

There's a brewing scandal over alleged kickbacks to the schools from lenders placed on a "preferred list" by school financial aid offices. Those rebates and other expenses might have raised the cost of loans to students using the providers that participated.

Even though your "aid letter" from the college or university certifies that you are eligible for federal financial aid, the rate and fees you pay depend on the lender you choose -- and the choice is yours! Don't stick with the "preferred list" the college gives you.

Start your search for lenders at This site has consistently offered the lowest rates and best deals for students. works with every college that participates in the Federal Loan Program (FFELP). advises you to negotiate with the lenders. You can ask for a better rate or a lower origination fee than the current 2 percent on Stafford loans.

Sobering analysis

The "opportunity cost" of college debt. Now you have one more task. Before making your final college choice, check in at

This Web site sponsored by Alliance/Bernstein, one of the largest 539 college savings plan managers, has an online interactive "slide rule" that lets you calculate how much your student loan debt will cost you to repay over the years -- in comparison to what you could have earned on that same money, assuming a hypothetical 6 percent tax-deferred rate of return. It's a sobering analysis.

Yes, college is worth it -- but only if you borrow sensibly. And that's The Savage Truth.

Terry Savage is a registered investment adviser. Distributed by Creators Syndicate.

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