has the appropriate forms.
If all else fails, and for middle-class
families it probably will, parents may look
to private or public sources for educational
loans. The simplest — and most costly —
option is simply to charge tuition and fees
to Visa or MasterCard. Many colleges ac-
cept plastic. Given the interest rate and re-
payment schedule, however, no one should
consider this anything but a last resort.
Most colleges offer some form of install-
ment plan for spreading tuition payments
over the course of an academic year, often
without interest charges. This arrange-
ment works well for parents who can afford
their children's tuition, but not in one lump
sum. As one mother of a freshman remark-
ed, "We'll live on my husband's salary, and
I'll simply be signing my monthly
paycheck over to the college."
The federal government's Guaranteed
Student Loan Program offers the advan-
tage of deferred repayment: interest (cur-
rently at 9 percent) begins to accrue only
after a student completes his education,
and the principal repayment need not
begin until six months after that. These
are unsecured loans; applicants go through
private banks and credit unions, and the
government's promise to back the loan
eliminates the need for collateral. If an
unemancipated minor takes out such a
loan, most banks require a parent or guar-
dian to cosign the papers.
For a considerably higher interest rate
and repayment beginning 60 days after
commencement of the loan, parents can
borrow an additional $3,000 a year through
a private bank. Again, the federal govern-
ment guarantees repayment.
By far the most favorable arrangement,
however, is the Perkins Loan, which
parents may remember in its earlier incar-
nations as the National Defense Student
Loan and the National Direct Student
Loan. Under this program students borrow
up to $4,500 a year directly from their col-
leges. The interest rate of 5 percent and
monthly repayment both begin six months
after the student leaves school, unless the
student enters the Peace Corps, VISTA, or
the military. In that case, the government
defers interest and principal repayment for
up to three years. Furthermore, if a student
enters the military or certain fields of

Applying For Financial Aid

For most forms of financial aid — Pell
grants, guaranteed loans, college grants
and scholarships — parents will have to
complete a Financial Aid Form (F.A.F.)
and return it to Princeton, New Jersey
for processing by the College Scholar-
ship Service, which is run by the Edu-
cational 'Testing Service, the same
wonderful folks who brought you the
S.A.T.'s. Among other nosy questions,
the F.A.F. asks about family income and
assets, student income and assets,
family debt and expenditures, and such
circumstances as divorce, disability, or
extraordinary medical expenses.
The College Scholarship Service
analyzes the information and deter-
mines the amount of money each stu-
dent and his family must contribute for
educational expenses. The U.S. Govern-
ment uses those figures to determine
eligibility for Pell Grants and guaran-
teed loans; thereafter, the colleges
receive the information and try to put
together some kind of financial aid
package to make up the difference.
If the student is lucky (read: poor
enough) and if the college has sufficient
money available, the student will get
what he needs to make up the shortfall.
But if the college can't provide a suffi-
cient package, or if the F.A.F. overesti-
mates a family's ability to contribute,
the student may just be out of luck.
The worst situation a middle-income

family can face is home ownership. Even
if the family has been house poor for
years, the F.A.F. counts the equity in the
home as part of the family assets, as if
a house were as fully liquid as cash in
the bank. Regardless of its cash flow
situation, a family may have to take a
home equity loan or a second mortgage
to meet its required contribution.
Nor does it help to sell an old house
and buy a more expensive one to in-
crease family debt: the amount of equi-
ty, and hence • the parents' required
contribution, remains unchanged.
Above all, never try to reduce family
income by transferring assets to chil-
dren or putting property in their names.
Before a student can receive any finan-
cial aid, under the current guidelines, he
must turn over essentially all his assets
— 35 percent of them each year — to the
college. The parents' obligation, on the
other hand, rarely exceeds 12 percent.
Suppose two families each have one
child in college and another in high
school, and each family has an annual
income of $50,000. Family A has put all
its money into buying a house, purchas-
ing savings bonds, and building up a
bank savings account, while Family B
spent all its money over the years on ex-
pensive trips, lavish parties, and con-
sumer goods. Which family gets finan-
cial aid for college? Don't ask.

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THE DETROIT JEWISH NEWS

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