Here’s how to look at it:

• Line A shows the school’s typical costs for one year (tuition, room and meal plan). That’s $21,000.
• Line B shows they’re offering you a scholarship worth $4,500. Great!  That brings your costs down to $16,500.
• Line C shows the additional expenses that may occur during that year. That brings your costs back up to $20,500.
• Now comes the big question – Line D. In this case, we’ll say the financial aid package from your school says you’re eligible to receive $5,500 in Federal Government Loans.  Will that loan lower your cost of attending? Will it increase it?

The answer is: it will increase your cost of attending by the amount of interest you pay on that loan.

Here’s why: Simply put, taking out a loan doesn’t lower what you have to pay, it just delays paying it for for a while. Only with a loan, you not only have to repay the amount you borrowed, you also have to pay interest on that amount. So your costs actually go up.

Of course, there’s no question that college does cost a lot of money. So for most students –between 60% and 70% of them, in fact – taking out a loan is a necessity, because they and their families don’t have that much cash available.

The message: be careful – and don’t get fooled into thinking loans save you money. They just let you spread out the amount of time to make your full payment. And in return, you have to pay out more in fees and interest.