Student Loans 101


by Maurice Salter, ED.D

Attending college is expensive. Students and their families work hard, save, and sacrifice to pay for a college education. And, the cost of college is not only the tuition or fees the institution charges. In fact the ancillary costs of housing, transportation, books, room and board plus incidentals (gotta have a computer, a cool mobile phone, and the right shoes!) can in many cases cost more than tuition/fees. We call all this the “Total Cost of Education.” All in, these costs can range between a low of $25,000 to over $75,000 per academic year. That means in most cases $35,000 to $100,000 of gross earnings go to pay education costs. Multiply that number if you have more than one child in college!

We offer financing tips that might surprise you:

First, know what your options are. In the financial aid world there are grants (typically do not have to be repaid); scholarships (typically do not have to be repaid); work-study where a student has a job on campus and uses her/his earnings to support their education; aid for the military (if you served your country there are excellent veterans’ benefits for education); federal student loans (namely the Stafford and the PLUS loan); private student loans (very competitive and often better rates than federal loans); and ISAs (Income Share Agreements are new in the marketplace and for many borrowers they are very attractive).

If you apply for Federal aid, then you must complete a FAFSA (Free Application for Federal Student Aid); this form assesses eligibility for all Federal Aid Programs and most federal aid is need based (meaning a family must meet financial requirements to receive aid). The glossary of programs that come under the Federal Department of Education is lengthy. If you plan to
apply for financial aid, it is advisable to contact the financial aid office at the institution you plan to attend and go to

Let’s focus on student loans.

Federal student loans are called Direct Loans and come in two flavors: Stafford (part of FAFSA eligibility); and PLUS (for undergraduate and graduate students), these loans offer the full cost of attendance, including tuition/fees, expenses, room and board, books, etc LESS other aid received, so grants, scholarships or any other aid will be deducted from the full cost. The PLUS is made to the parent(s) for undergrads and to the student for grad/professional programs. These loans are credit checked unlike other aid. This year PLUS loans are at a fixed interest rate of 7.6% for a term that can range from 10 to 25 years, so borrowers are going to be wed to these loans for quite some time and the rates are rather high. If a family borrows $100,000 over four years of undergraduate education ($25,000 per year) and has a 20 year repayment term, payments will be over $800 per month).

There are many private loan lenders like First Republic Bank, Sallie Mae, Discover, Wells Fargo Bank and SoFi. Their rates can be as low as 1.95% so it pays to check them out as well, especially if you have a relationship with a bank that offers private loans. The most interesting loan to emerge is the ISA. In a nutshell, an ISA takes a percentage of your earnings after you graduate based on how much you earn and can increase as your earning increase, thereby allowing a borrower to pay less as they establish their career and more as they earn more and can afford higher payments. Interest rates are lower than Federal loans as well.

The financial aid process is a relatively complicated one with lots of moving parts and options. It pays to take the time to explore your options. College financial aid offices and website are an excellent resource so be sure to coordinate with them to assure that deadlines are met and that you know your options. Many families ask if applying for financial aid diminishes the student’s chances for admission. Colleges subscribe to “Need Blind Admissions” which means they admit students regardless of their ability to pay. At most institutions the majority of their students have some form of financial aid. Some institutions like Yale and Princeton assure students that they will not have any student loan debt if they are financial aid applicants but that is rare. And, many have scholarship programs for admitted students, so check what colleges offer and if you think you might qualify then apply. And, some institutions will offer merit scholarships that are not need based. Thus, there are many options, and the key is being educated.


-Maurice Salter is the founder of Maurice M. Salter and Associates in Los Angeles, which specialized in college advising for undergraduate, graduate and professional school admission, as well as financial aid. In addition, the company did extensive work in test preparation (e.g., SAT, ACT, GRE, ISEE) and in subject-area tutoring. Maurice M. Salter and Associates was the largest and most comprehensive college counseling company nationwide. Dr. Salter works in finance now, but still continues to counsel students throughout the U.S..