Victory State Banks Shares FDIC Tips on Minimizing Borrowing Costs for College
STATEN ISLAND – High education often translates to higher debt. But according to Victory State Bank, there are ways to reduce the financial burden.
The bank points to the Federal Deposit Insurance Corp.’s online Consumer News tips for minimizing the cost of borrowing for college.
According to the FDIC, you should:
Start saving early to reduce the amount you may need to borrow.
In particular, Section 529 college investment plans, which are mostly offered by individual state governments, are a helpful tool for building a savings fund.
One type of 529 plan gives you the right to lock in future tuition at today’s prices. The other allows you to place funds in an investment or deposit account and receive tax benefits.
U.S. Savings Bonds are another way to save for the future and, for qualified taxpayers, to benefit from a tax exclusion if the money is used for education expenses.
To learn about Savings Bonds, start atwww.treasurydirect.gov/indiv/indiv.htm. For information about the tax exclusion, go towww.treasurydirect.gov/indiv/planning/plan_education.htm.
Find ways to cut costs.
High school students who take advanced courses or pass special college-level exams can earn college credits before they set foot on campus. “It’s never too early or too late to start saving on future tuition expenses and reduce the amount you’ll need to borrow for college,” said Denise Waters, an FDIC Consumer Affairs Specialist.
Other ways to save include going to a nearby school and living at home; choosing a college regarded as both high-quality and low-cost; and attending a community college for a few semesters before transferring to a more expensive, four-year institution.
If you must take out a loan, understand the different options.
Federal student loans usually have lower interest rates and more flexible repayment options than private loans from non-government lenders such as banks and credit unions.
Under current law, all federal student loans are obtained through the Federal Direct Loan Program administered by the U.S. Department of Education. The easiest way to apply for a federal loan, as well as federal student aid and most state and college aid, is online at www.fafsa.gov.
And, to learn more about federal student loans, start at http://federalstudentaid.ed.gov/students.html.
Private loans are available for expenses not covered by savings, financial aid or federal loans, but do your homework before borrowing. “Many private student loans have interest rates that may change periodically, which could increase your monthly payments,” said Heather St. Germain, an FDIC Consumer Affairs Specialist. “It also is difficult to find a private lender that provides repayment options as attractive as those offered by the federal government.”
“Some private loans can carry high interest rates that may be difficult to repay on the salary of the typical recent college graduate,” added Evelyn Manley, a Senior Consumer Affairs Specialist at the FDIC.
Choose the best repayment plan.
For federal student loans, a monthly, fixed payment over a standard, 10-year term is the most cost-effective arrangement and minimizes the total amount of interest you’ll have to pay.
However, there are alternatives, including repayment periods up to 25 years, graduated repayment plans that start low and increase every year or two, and monthly payments that increase or decrease based on your annual income (for certain loans). For guidance on whether income-based repayment may be right for you, visit http://studentaid.ed.gov/ibr.
For more information for students and parents from the FDIC, the U.S. Department of Education and other government agencies — on topics ranging from money tips for young adults to saving for college — start atwww.mymoney.gov/category/topic1/going-college.html.
About Victory State Bank:
VSB Bancorp, Inc. (NASDAQ: VSBN) is the one-bank holding company for Victory State Bank. As Staten Island, N.Y.’s only community-based commercial bank, Victory State Bank operates five full-service locations on the Island: The main office in the community of Great Kills, and branches in the communities of West Brighton, St. George, Dongan Hills and Rosebank. For additional information, Victory State Bank may be reached at 718-979-1100 or visited online http://www.victorystatebank.com .