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2006: A look back - A look ahead  
  Change was the name of the game in 2006 while the biggest push for reform in 2007 will be aimed at college-related debt.
 College financing
 Personal finance calendar  Personal finance calendar 

Paying for college: best strategies for the year

"The FAFSA is not nearly as complicated as people describe it to be," says Dallas Martin, president of the National Association of Student Financial Aid Administrators. "If you've got a copy of your income-tax form, you should be able to fill it out in 35 or 40 minutes max."

Paper FAFSA applications are discouraged. The experts recommend applying online because it's faster. You can complete the application for the 2007-2008 academic year after Jan. 1, 2007. But it's best to get it in early -- within the first two weeks of January if possible. Many schools use the federal form to determine how they'll award scholarships and other aid, too.

"Colleges have a finite amount of dollars to give out," Martin says. "There's a very good chance if you wait too long you may miss a college's deadline to be considered a top priority for financial aid."

Once you fill out the FAFSA, you will get a Student Aid Report, which will list the expected family contribution toward college costs. If you don't get the report within a month, follow up to make sure there are no errors or other processing glitches.

Now you're in the running for various financial aid options. As of the 2006-2007 school year, two new federal grants are available for students who qualify for Pell Grants -- the Academic Competitiveness Grant and SMART Grant.  

You may also need loans to help foot the bill, whether you qualify for government grants or not. Consider that a whopping 86 percent of Pell Grant recipients borrow to pay for college while 52 percent of non-Pell recipients take loans, according to the National Center for Education Statistics.

If you're among the legions who'll borrow, always try to obtain a government loan first. They're cheaper and more flexible than loans from private sources. As of July 1, 2006, Stafford loans for students come with fixed rates of 6.8 percent. PLUS loans for parents are now also available to graduate students. Some currently have an 8.5 percent interest rate; others, funded by the U.S. Treasury, have rates of 6.8 percent.

Avoid private loans if possible
Private loans may seem easy to obtain (or at least easier than filling out that FAFSA), but they could bury you in debt for years to come, Martin says.

"We're seeing increasingly aggressive marketing with private loans. In some cases, lenders go directly to consumers and offer great deals, so people say, 'I have to take a loan anyway. Why not here?' But many families might have qualified for federal loans that have better repayment terms, lower interest rates and better benefits."

Before you sign on the bottom line with a private lender, be sure to understand the terms and read the fine print.

-- Posted: Nov. 1, 2006
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