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Five Steps to Funding Your DPT or t-DPT

The EAS Five-Step Approach is designed to help students and their families create a personalized plan for paying higher education-related costs that ensures full exhaustion of the least expensive funding sources first (those with the fewest strings attached to them), and taking on the lowest amount of debt possible.

Step one: Identify or create reserves of savings, investments, and available cash that can be specifically targeted for education expenses. The savings and investments in this step are funds you have placed, or are going to place, aside in a systematic way-in interest-bearing accounts, stocks and bonds, investments, and cash-to pay for education. "Available cash" refers to what you can afford to sock away out-of-pocket from your income now and after you begin your education program.

How much you'll be able to pay out-of-pocket will depend on two factors-your household income and your household expenses. The more wisely you manage your expenses now and while you are in school, the more cash you will have available to meet your educational expenses when it comes time to pay the bill. Five percent of your household's take-home income is a conservative estimate of what you might try to save or pay out of pocket; 10% to 15% is even better.

Step two: Prepare and file a FAFSA. While you should try to take on as low an amount of debt as possible, it is prudent to find out how much need-based financial aid you can qualify for should you require it. You can find this information out by preparing and filing a Free Application for Federal Student Aid, or FAFSA. (Go to www.fafsa.ed.gov). The FAFSA should be completed and submitted on January 1 of the year you plan to enroll, or as soon as possible after that date.

Need-based financial aid is distributed to students who are determined to be in financial need based on a standardized analysis of their income and assets, their families' income and assets, and other factors as reported on their FAFSA. For federal student assistance programs, the need-analysis system is defined by law and results in a number known as the Expected Family Contribution (EFC).

The EFC is what a student and his or her family will be expected to reasonably contribute to the cost of the education. You become eligible for needbased financial aid when your ability to pay is less than the costs of the school you plan to attend. Your financial need is determined by subtracting your EFC from the cost of attendance. Graduate students generally are considered to be independent, so parental contributions would not be considered as part of the EFC amount. If a graduate student is married, however, his or her spouse's income can be included.

Online calculators are available to help students estimate their EFC. (One such calculator is available at www.finaid.com; click on "Calculators" and follow the links). You also can work with a school financial aid administrator.

Step three: Investigate scholarships, grants, work/work-study opportunities, and graduate assistantships. These all are types of financial aid that needn't be paid back. These funds come from various sources, including the government (federal, state, and local), universities and colleges, and private organizations. You can use income from scholarships, work/work-study programs, and graduate assistantships to augment or reduce the amount of money you draw from Step One sources. A good start in the process of locating scholarships, grants, work/work study opportunities, and graduate assistantships is to check with the financial aid office of the school you wish to attend. As a general rule, you should never pay to search for these opportunities, because there are many free tools available on the Internet available to assist you with this process.

Step four: Consider other investment assets. Other investment assets are monies that you have accumulated through the purchase of such financial and material resources as CDs, stocks, bonds, real estate, and art. These are assets you have not developed specifically for the purpose of paying for education, but which could be used for this purpose. In order to tap these assets, you must convert them. Methods of converting investment assets can include selling real estate, other real property, or stocks or bonds; making a withdrawal from a 401 (k) or Individual Retirement Account; and making a withdrawal of cash value from a life insurance policy. Tapping into other investment assets generally should be done only at the point when you need the money. For example, if you need funds to help pay for the second year of your t-DPT program, you might sell stocks or withdraw funds from a life insurance policy 2 or 3 months prior to the payment due date.

It is important to note, however, that, depending on individual and/or family circumstances, it may be wiser in the long term not to convert investment assets at all and skip to Step Five sources of funding, or to tap Step Five resources before you draw on other investment assets. Whatever you choose to do, it is important that you consult with professional financial and tax advisors before making any financial decision regarding sale or purchase of any investment assets.

Step five: Research other nongovernmental loan options, such as:

* Alternative/private education loans. Even if you are not eligible for federal or state government education loans, you may be eligible for credit-based alternative/private education loans. Some private/alternative loans require that you meet need-based criteria, while others are strictly credit-based and require only that you certify enrollment. As with any loan, it is important to pay close attention to interest rates and repayment terms to ensure that you can bear the costs and meet repayment expectations.

* Leveraged loans. Leveraged loans entail borrowing against assets you own. They often offer favorable interest rates and repayment terms. In a leveraged loan situation, you are actually borrowing money from yourself. Examples of leveraged loans include home equity loans, lines of credit, second mortgages, and margin loans on your equity accounts (stocks and bonds). In some cases, interest on these loans may be tax deductible, which can add to their attractiveness. To fully explore the pros and cons of tapping this funding source, consult with a professional financial or tax advisor.

* Personal unsecured loans. The most common personal unsecured loans are obtained through use of credit cards. Because they are so easy to use, they are a very tempting form of payment. It is best, however, to use a credit card for education debt only as a very last resort. Education financing professionals are firmly against using credit cards and personal unsecured loans or unsecured lines of credit to pay for college or graduate school because of all the attendant "catches" and risks-including high interest rates, significant penalties for late or missed payments, and great potential for adverse impact on one's credit rating.