Section 8.4 Student Loans
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Some states have a plan for saving
for college called a 529 plan. A 529
plan is a savings plan for college that
requires that payments be made over
time for use in the distant future. The
funds from these plans can be used to
pay for colleges all over the country.
They are not meant for a specifi c college.
One drawback of money placed in a
529 plan is that it can only be used for
educational purposes. For instance,
these funds cannot be used to purchase a car after you graduate.
You may need to take out a student loan if these alternatives do not cover
all of your college tuition costs. Use the following formula to fi nd your remaining
tuition costs after your tuition assistance options have been exhausted:
student loan balance = total cost – total tuition assistance
Example 8-4C
See It
Holly is attending a university. The estimated cost of tuition and fees will
be $6,750 per year. She has earned a $2,000 per year scholarship and has been
accepted into a work-study program that will pay $3,125 per year toward her
tuition and fees. Holly plans to use student loans to pay for the remaining tuition
and fees. At the end of her four-year program, what will Holly’s student loan
balance be?
Strategy
Use the formula:
student loan balance = total cost – total tuition assistance
Solution
Step 1: Determine the total costs of tuition and fees for Holly’s four-year
program. Multiply the annual cost by four.
total cost = annual cost × number of years
total cost = $6,750 per year × 4 years
total cost = $27,000
Step 2: Determine the combined annual amount of tuition assistance Holly will
receive. Add the amounts of the annual scholarship and value of the work-study
program.
annual tuition assistance = annual scholarship + annual work-study value
annual tuition assistance = $2,000 + $3,125
annual tuition assistance = $5,125
As you are preparing for education after high school,
you will need to include funding for your education as
part of your fi nancial plan. There are many diff erent
ways to fund college or other types of training needed
to pursue a career. One funding source is a work-study
program. These programs are available on some campuses
and enable students to work part-time while going to
school. Work-study programs are often funded by the
government. Check with your counselor for other sources of funding.
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