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Shop Around for Financial Aid

Not all federally guaranteed student loans carry the same interest rate.

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 important in the years ahead. 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 prestige of a 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.

Comparing Financial Aid Offers

The Web site of the

Pennsylvania Higher Education Assistance Agency 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.

Another Web site,, offers more-sophisticated comparisons and advice for $59 from college adviser Dr. Paul Wrubel. He notes that many schools include PLUS loans as part of their aid packages to make their offers 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 and says it's worth trying.

Not All Federal Student Loans Are Equal

If you haven't read the headlines lately, you might not be aware that federal student loans carrying the same name -- typically Stafford Loans, PLUS loans and GradPLUS loans -- do not necessarily carry the same interest rates. The 6.8% rate on Stafford loans, which most lenders charge, is only a government-set



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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 may have raised the cost of loans to students using the providers who 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

MyRichUncle. This site has consistently offered the lowest rates and best deals for students. MyRichUncle works with every college that participates in the Federal Loan Program, or FFELP.

Some student loan tips from MyRichUncle:

  • Look for up-front discounts on the current 6.8% maximum rate on Stafford loans.
  • Negotiate with the lenders. You can ask for a better rate or a lower origination fee than the current 2% on Stafford loans.
  • Avoid school-branded loans for which the school acts as a middleman in the process.
  • You don't have to stick with the same lender every year. Recheck annually to make sure you're getting the best deal.

Real "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 with what you could have earned on that same money assuming a hypothetical 6% tax-deferred rate of return. It's a sobering analysis.

Yes, college


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

Terry Savage is an expert on personal finance and also appears as a commentator on national television on issues related to investing and the financial markets. Savage?s personal finance column in the Chicago Sun-Times is nationally syndicated, and she released her fourth book,

The Savage Number: How Much Money Do You Need?

in June 2005. Savage was the first woman trader on the Chicago Board Options Exchange and is a registered investment adviser for stocks and futures. A Phi Beta Kappa graduate of the University of Michigan, Savage currently serves as a director of the Chicago Mercantile Exchange Corp. She also has served on the boards of McDonald?s and Pennzoil.