Paying for college: a last-minute lesson

College tuition bills for the fall semester are due in the next few weeks, and for some families it will be panic time: They won’t have the money.

It’s not unusual, some schools say, to hear from families in this predicament.” There are all kinds of reasons,” said Frank Valines, associate director of financial aid at the University of Maryland, College Park. “They range from ‘I didn’t realize how much tuition was going to be. I wasn’t prepared to pay that much,’ to ‘We just had a financial setback and can’t pay the bill.’ Or ‘We’re getting a divorce and Dad’s not going to pay or Mom’s not going to pay.’ “

Resources are more limited now, but it’s not too late to get help. Aid officials advise families to contact schools as soon as they realize they will come up short. Last-minute assistance will differ among colleges, but here are some options:

Special circumstances

A job loss, a parent’s death or medical emergency can deplete cash reserves that families had counted on for college.

Many colleges try to reserve some funds for such unexpected hardships, but not all cases generate sympathy or funds. Forgetting to save money for college or having a lousy quarter in the stock market likely won’t loosen school purse strings.

Families with a hardship should contact the school and request a review of aid. They typically must send a letter explaining the hardship and its impact on finances, while also providing documentation, such as a copy of a layoff notice or a death certificate, experts said.

Tuition payment plan

Many schools allow families to pay tuition on a monthly basis, stretching payments over, say, eight to 10 months. The payments are interest-free, but the plans charge a yearly application fee of $35 to $75.

Still find it tough to meet monthly payments? Review household expenses, looking for items to cut, or adjust your withholding to boost your take-home pay (at the expense of a big end-of-year tax refund, however).

Scholarships

Most scholarships for the coming academic year were awarded many months ago. The pickings are slim now, but there are still scholarships with deadlines every month, said Mark Kantrowitz, publisher of FinAid, an online source for financial aid information. Search for potential scholarships at www.fastweb.com, Kantrowitz suggested.

Government loans

Students can apply any time of the year for federal Stafford loans, which don’t have to be repaid until months after graduation. If students meet the needs test, Uncle Sam will pay the interest on the loan while they’re in school.

Students whose family income is too high can still borrow under the program, but they will have to pay their own interest while in school. They can delay interest payments while enrolled by adding the expense to the loan’s principal. The interest rate on Stafford loans is adjusted yearly and is at an all-time low of 2.77 percent now.

Stafford loans have borrowing caps, but basically dependent students can borrow up to $2,625 as freshmen, $3,500 as sophomores and $5,500 a year as juniors and seniors.

If they are independent, such as 24 or older, they can borrow up to an additional $4,000 for each of the first two years of school and $5,000 for each remaining year. The interest is not paid by the government.

For parents, there is the federal Parent Loan for Undergraduate Students (PLUS). Parents can borrow the cost of attending school, minus any financial aid received. PLUS loans are available regardless of income, although parents must pass a credit check. The interest rate on PLUS loans, now at 4.17 percent, is adjusted annually.

Home equity

With rising home values and interest rates still low, families might opt to tap the equity in their houses.

A home equity loan enables parents to borrow a lump sum, usually at a fixed interest rate. A home equity line of credit works more like a credit card. Borrowers receive a credit limit and draw down only what they need at the time. Usually the interest rate is variable and monthly payments will go up.