In the Latino community, the dream of a college education is thriving. In 2017, more Latinos are enrolled in college than at any point in our nation’s history. Much of this progress has been made in just the last decade.

In 1993, just 22% of Latinos aged 18-24 years old were enrolled in a college program. In 2014, 35% of Latinos aged 18-24 years old were enrolled. This 59% surge in college enrollment by Latinos over the last decade is the largest gain seen by any group tracked by the U.S. Census Bureau. By comparison, Blacks, Whites, and Asians saw just a 50%, 13.5%, and 16.36% improvements in college attendance rates over the same time period.

Would you like to be part of the movement? Do you feel like the cost is holding you back?

It’s normal to feel like that, as the cost of college can be enormous. In 2016, the average cost of attending a private university in the United States per year was a whopping $33,480. Even for in-state residents attending public universities the average cost was $9,650.1

How does anyone afford this? There are four “buckets” which most college tuition is paid from.

1. Out-of-pocket

If you can work during college, or have some money saved up, you will be “paying out-of-pocket”. This means paying for tuition with money that is not provided by a grant, scholarship, or loan.

2. Grants

Grants are sometimes referred to as “gift aid”. It’s free money, which does not need to be paid back and is generally given to students from specific demographic backgrounds or for students with financial need.

3. Scholarships

Scholarships, unlike grants, are merit based. This means that scholarships are given to students who excel academically, in sports, or other niches. There are tons of scholarships out there, and it is worthwhile doing a web search to see if any apply to you. We will cover scholarships in more detail shortly.

4. Student loans

Lastly, are student loans. These are loans which must be paid back to a lender - generally once you have completed your education. The most common lender of student loans is the U.S. Federal Government. Private banks, and credit unions, also issue loans to students looking for additional funds.

In reality, most students pay for college with a combination of the four “buckets” shown above. In general, student loans should be used as a last resort. If the money is available out of pocket, from grants, or through scholarships - these should be leveraged first. It is important to mention this because currently in the United States we are currently seeing a student loan crisis.

By the most recent estimates, Americans are carrying $1.4 trillion in student loan debt. In comparison, this is about $620 billion MORE debt than the total outstanding credit card balance of the United States. Roughly 10% of student loans are in default (meaning they are 90 days or more past due) and the average monthly payment is $351. 2

These statistics aren’t meant to deter anyone from attending college or getting student loans. We want to highlight the fact that getting a student loan is a big commitment, and if other options are available they should be taken advantage of. Let’s explore these “other options” a bit more.

Paying Out-of-Pocket

Particularly for students attending in-state public colleges, or community colleges, it can be useful to explore paying for a portion of expenses out-of-pocket. The idea of the “poor college” student who is working their way through school is famous in the United States. Why? Because many Latinos have made the dream of college possible by working and taking classes as they can afford it.

Grants

As mentioned, grants are “free money” which do not need to be paid back. Grants are most commonly given to students from low-income families or students who will be studying a specific subject in college. There are grants available for single-mothers, grants for students who will become teachers, and grants specifically designed for military service members who have served overseas. If none of these apply to you, consider doing a quick Google search for terms based on your specific interests or situation - the results may surprise.

Scholarships

Scholarships are mostly given out for outstanding academics or for collegiate pursuits, but that is not always the case. The College Assistance Migrant Program gives support to children of migrant workers and the Hispanic Scholarship Fund is setup to support all Latinos. Again, doing a quick Google search specific to your situation can open doors you may not otherwise know exist.

Lastly, it’s important to acknowledge the fact that applying for grants and scholarships can feel laborious. The applications can be long and in some cases the chance of being awarded funds may be slim. Focus your energy on the grants and scholarships you feel are most suited to your specific situation, and apply aggressively. If you can get $500 or $1,000 worth of education funding for an hour of work, it is well worth your time.

Student Loans

Finally, are student loans - the reason you probably started reading this article. The point of discussing grants, scholarships, and out of pocket options is to ensure that our readers are making the best financial decisions possible. For some Latinos, a student loan is a right fit, for others, it might not make sense. Keep reading to explore some of the most popular types of student loans available.

When it comes to student loans, there are two primary lenders to consider:

  1. The U.S. Federal Government
  2. Private banks and credit unions

In general, the U.S. Federal Government is more flexible in providing loans and these loans many times come with lower interest rates. The reason is simple. The U.S. Federal Government is seeking to send as money students to college as possible, as it’s a good long term investment in the economy. Private banks on the other hand are in the business of making money, and their motivations are generally focused in that direction.

If you are interested in working with the government, a great starting point is the FAFSA program. FAFSA stands for the Free Application for Federal Student Aid and is generally considered the right starting point as you begin your search. This application will give you access to not only student loans, but grants that are available through the government. The Federal Government’s FAFSA website contains information on which types of loans are available and even information on how to avoid scams as you begin working with lenders.

You will find several types of student loans: Stafford Loans, Perkins Loans, and PLUS loans, Private Education Loans, and Direct Consolidation Loans. Let’s explore each of these in a bit more detail.

Stafford Loans are made directly from the Federal Government through the Federal Direct Student Loan Program. These loans have favorable lending terms but many times come with a maximum per year loan amount. These loans come in two flavors: subsidized and unsubsidized.

Subsidized loans are generally saved for students who are in financial need and the big perk is that the government pays the interest on these loans while you are in school.

Unsubsidized loans are more expensive, but may be easier to come by. You will be responsible for paying all of the interest associated with the loans but the interest rates are fixed at 3.76% for the 2017 school year. Even though you must pay all of the interest, this interest rate is lower than you can typically find at private banks (where you need to pay the interest anyways).

Perkins Loans have been extremely popular, but the program will likely be ending in October of 2017 due to recent legislation. If you have already received a Perkins Loans, you will not be affected, but students who are currently searching for loans are advised to look elsewhere.

PLUS loans are specifically designed for parents and graduate students. Unlike Stafford Loans, there is no loan limit - but the interest rates can be hefty. For PLUS loans made in 2017 the interest rate is a fixed 6.31%.

Private Education Loans are designed for students who need additional help paying for college above and beyond what is provided from the other loans listed above. These are generally used at private universities and colleges, where tuition fees are likely to be much steeper than those found at public colleges.

Regardless of the type of loan you choose, it is common for students to work with a number of lenders during a four year college program. This means that many students leave college with the obligation to pay back two, three, or four loans simultaneously. This can create a logistical nightmare as you try to juggle your debt obligations on a monthly basis. The answer to this problem - the Direct Consolidation Loan.

As the name implies, this is a loan that can be used to consolidate all of your loan agreements into one new loan. Think of it like you would a home refinance. For students just beginning college this topic isn’t top of mind, but will become more relevant if you find yourself managing multiple loans after graduation.

Final Thoughts

A college education can be a great way to increase your job prospects, meet interesting people, and learn valuable new skills. As with any major financial decision, it is important to consider whether a combination of out-of-pocket payments, grants, scholarships, and student loans can make your dream a reality. As always, we will be with you every step of the way here at Super Monedero.