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A Different Kind of Student Stress
Lori Bender
The most commonly asked question I receive from parents is: “How do we pay for college and what can we do if we can’t afford it?” College costs are rising, and inflation is affecting every family. The average annual cost of tuition at a public 4-year college is 23 times higher than in 1963. Another way of looking at that statistic: after adjusting for currency inflation, college tuition has increased 747.8% during that time.
Which is mind-boggling. This doesn’t mean you can’t afford college, but it does mean that before applying to colleges, you and your student should investigate the cost and discuss what your family will pay for higher education. You can gather information on each individual college website or by using College Navigator. You should also research the college’s financial aid statistics — what percentage of students are awarded aid, how much aid is awarded, and how much do students typically borrow. Since every family’s financial situation is different, these figures should help determine what your family can afford to pay for college.
There isn’t a one-size-fits-all formula for how much parents should contribute toward college costs. Some believe it’s the parents’ responsibility to cover the entire cost while others feel that students should pitch in. Here are some strategies to help you finance a college education regardless of your approach.
Parents Pay the Entire Cost
A few tips if you plan to cover all your student’s college expenses:
→ Don’t dip into your retirement — it’s not worth the cost-benefit in the long run.
→ Consider a Parent Plus Loan if you haven’t saved enough, but remember these loans must be repaid and cannot be discharged in bankruptcy.
→ If you have time, start saving (for example, through a 529 college savings account). Every little bit helps!
→ Apply for financial aid by submitting the FAFSA. Your student might qualify for need-based aid, and colleges use the application to determine eligibility for non-need-based aid.
→ Check if a college offers a monthly payment plan to spread out tuition payments.
Parents and Student Share Costs
Students who are financially invested in their education tend to take it more seriously. Here are ways students can contribute:
→ Take dual-credit and/or AP classes during high school to earn college credits early.
→ Consider attending a community college for the first year or two to reduce the overall price of a degree.
→ Participate in the Federal Work-Study program to earn money for education-related expenses.
→ Get a summer job or part-time gig during the school year to keep cash coming in.
→ Apply for private scholarships and grants throughout college. Check out these popular scholarship search engines: Scholarships.com, Scholly, Scholarships360, and Appily.
Student Pays the Entire Cost
In addition to the above strategies, a student who’s covering all their own college expenses may need to take out a student loan. Only borrow what you need and choose loans with the lowest interest rates first. The rule of thumb is that students should only borrow as much as their anticipated first year’s salary.
Working your way through school? Nearly half of employers offer tuition assistance — does yours offer this benefit?
Even if you don’t think you will qualify, students should always apply for financial aid. Colleges use these forms to disburse federal funds and merit aid to accepted students.
The rollout of the new, “simplified” FAFSA (Free Application for Federal Student Aid) was glitchy, but hopefully problems will be ironed out for this fall’s application cycle.
Key Changes Include:
→ All contributors (parents and students) need FSA IDs.
→ The IRS imports tax information automatically.
→ States with their own financial aid forms pull information directly from the FAFSA.
→ The Student Aid Index (SAI) replaces the EFC (Expected Family Contribution) and is calculated using new criteria.
→ The Pell Grant award expands, including more students and offering higher awards.
→ There are fewer questions (down to 18 from 103).
→ You can list up to 20 colleges (up from 10).
→ The sibling discount was eliminated.
One of the most complicated things to figure out is which parent(s) need to provide financial information, especially if there is a divorce or separation, or stepparents provide support. When you visit the FAFSA website, a financial aid virtual assistant will pop up to answer any questions.
You can access and submit the form on the Federal Student Aid portal.
The CSS Profile
This form is used by more than 300 colleges, universities and scholarship organizations. It provides participating colleges with a more detailed picture of your family’s finances. The College Board recently announced plans to create a “lighter, shorter” version of the lengthy application, which many college access advocates have described as a barrier for low-income and first-generation applicants.
There are two basic types of aid: need-based and non-need-based. Need-based aid consists of grants and scholarships that are issued based on the family’s ability to contribute to education costs. Non-need-based aid is allocated based on availability, not need.
The easiest way to understand financial aid is to break it down into simple categories: federal aid, state aid, and institutional aid or merit aid.
The U.S. Department of Education awards about $150 billion a year in grants, work-study funds, and low-interest loans to more than 15 million students. Federal student aid covers such expenses as tuition and fees, room and board, books and supplies, and transportation.
Grants
Grants from the government are provided based on financial need or special circumstances and generally do not have to be repaid. These grants rarely pay for the entire cost of college and are just one portion of the federal aid package.
Loans
Believe it or not, many colleges consider loans to be financial aid and often use loans to bridge the gap between what you can afford to pay and the cost of attending the college. Every student qualifies for student loans.
There are two types of government-based loans: subsidized and unsubsidized. Subsidized loans have lower interest rates and are awarded based on the student’s financial need with interest deferred until after graduation. Unsubsidized loans are awarded without regard to financial need with interest payments beginning immediately and regular payments after graduation.
For detailed information about federal student and Parent PLUS loans, visit StudentAid.gov.
Work-Study
This is a campus-based program that uses federal dollars distributed to the colleges. If a student has demonstrated need, work-study might be included in their financial aid package. Students receive their award directly in the form of a paycheck from their on- or off-campus work-study position.
Many states use the FAFSA to determine eligibility for their financial aid programs, but some states have additional requirements, and some offer a separate application for individuals who cannot submit a FAFSA.
Each state distributes this money differently. Some states provide the aid directly to students while others distribute it to the colleges and universities.
States offer many types of financial aid. The most common types of aid are need-based grants, but some states also offer merit-based grants, scholarships, educational loans, and tuition waivers. You can search on your state’s education website or use this easy map guide provided by U.S. News and Education.
Institutional or Merit Aid
The application process for institutional financial aid varies. Most colleges only require a student to submit the FAFSA, and often the college’s financial aid office will automatically consider a student for these awards when assembling the financial aid package. In other cases, a student may need to fill out additional forms (the CSS Profile or an institutional application) and submit other materials (such as transcripts, essays, portfolios, etc.) to be considered. Check with the college for specific guidelines.
Once you have applied for financial aid, consider these other ways to save on college costs:
→ Graduate on time — Graduating in four years or less can save on tuition, room and board, and other expenses.
→ Get credits before applying to college — Get AP credit, IB credit, or dual credit in high school to save on tuition. Community college credit during summers can also help save on costs.
→ Apply for a Resident Assistant position — Students who live on campus can apply for a Resident Assistant (RA) position after their first year. Colleges typically reduce the room and board bill or even offer free room and board to RAs.
→ Reevaluate the student meal plan — If you find your student isn’t eating three meals a day in the dining hall, why pay for them? A partial meal plan should be sufficient and cost less.
→ Take advantage of student discounts — Discounts for students are available on food, entertainment, and travel. Local businesses, restaurants, and grocery stores usually accept a student ID card for discounts. If not, they may offer their own discount card for students to use.
→ Save on textbooks — Purchase used textbooks at the college bookstore or through websites like Chegg, Barnes & Noble, and Amazon where students may also search for textbook rentals using the book’s ISBN, title, or the author’s name.
The rising cost of a college education and the impact of inflation requires thorough planning and informed decision-making. Families should research costs, explore financial aid options, and consider various funding strategies to make higher education attainable. Proper preparation and proactive measures can help ensure that the dream of higher education remains within your family’s reach.
