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Move beyond your sticker shock; there are ways to pay for college


Whether you’re in the process of sorting through your teen’s college acceptance letters, or just starting to think about PSATs, don’t be completely scared off by the outrageous costs of higher education. Last year, according to the College Board, undergraduate students received an average of $14,460 in financial aid, including $8,390 in grants and $4,720 in federal loans.

About two-thirds of full-time undergraduate college students receive some type of financial aid, so there are definitely ways to help pay for your child’s post-secondary education. In other words, don’t let the price tag deter you from a good college.

Just remember that in order to qualify for any federal or state money, you must first file a Free Application for Federal Student Aid (FAFSA) at fafsa.ed.gov. Even if you think that you won’t qualify for aid, you should fill it out and file it. Do so as soon as possible if your child is a senior in high school; if you’re reading ahead, do it as soon after January 1 as you can in their senior year, as some aid awards are made on a first-come, first-served basis.

One key thing the FAFSA will provide you with is an Estimated Family Contribution (EFC) — the amount you will be expected to pay toward your child’s education before federal aid can kick in. Let’s say your EFC is calculated to be $25,000 and your child’s desired school costs $30,000; your “need” amount, as far as the government is concerned, would be $5,000. The EFC is determined by a number of factors, including your and your student’s income and assets as well as the size of your family.

Some colleges may also ask that students and their families complete the CSS/Financial Aid Profile. Check with your college to see whether this additional form is required.

Here are the three main types of college money. For more details on student aid, visit StudentAid.ed.gov.

Free Money

We all love getting gifts, especially when they’re in the form of money for college. Need-based grants and merit-based scholarships are commonly referred to as “gift aid” because they’re free and don’t need to be repaid. This free money can come from the federal government, state government, a private or nonprofit organization, or your son or daughter’s college or career school. Last year, institutional grant aid from colleges and universities grew to $54.7 billion.

Federal Grants

  • Federal Pell Grants
  • Federal Supplemental Educational Opportunity Grants (FSEOG)
  • Teacher Education Assistance for College and Higher Education (TEACH) Grants
  • Iraq and Afghanistan Service Grants

Scholarships

How do you find scholarships? Some might be for good grades or student athletes while other scholarships might exist because you belong to a particular church or are a twin. There seems to be a scholarship out there for practically everything, but the catch is that you have to find it and apply in time. It sounds like a lot of work, but the potential payoff is worth it! Your teen’s school counselor may even post information in his or her office about many of the scholarship opportunities, so ask your teen, or ask the counselor directly.

Borrowed Money

As part of your student’s financial aid package, he or she may be offered loans. Naturally, these have to be paid back, so it’s important to understand the various types of loans.

Federal Loans

  • William D. Ford Federal Direct Loan (Direct Loan) Program. Keep in mind that there are subsidized and unsubsidized Direct Loans. With subsidized loans, the Department of Education pays the interest while your student is in school.
  • Federal Perkins Loan Program. This is a school-based loan for which the college or university is the lender.
  • Parent PLUS Loan Program. Remember that Estimated Family Contribution? Just because the FAFSA shows you have money to contribute doesn’t mean that you really do. This is a loan from the federal government that credit-worthy parents can take out to bridge the gap between what financial aid provided — such as grants, scholarships and other federal student loans — and the actual annual costs of their child’s college. Payments can be delayed until your child graduates college, but note that the interest will be accruing all the while.

Private Loans

Federal loans come with benefits such as fixed interest rates and income-based repayment plans (except for the Parent PLUS on the latter), so you should always seek those types of loans out first. However, private loans are also an option. Just keep in mind that they may have variable interest rates, are not subsidized, may require an established credit history, and you or your student may have to start making payments while your student is still in school.

Earned Money

If you qualify for financial aid, the Federal Work-Study Program offers part-time jobs that allow your student to earn money for school. Your student will typically work on campus, but some Work-Study jobs are off campus. Wage and total hours can vary, but they are determined by your FAFSA and your school’s level of funding.

If your child doesn’t qualify for Federal Work-Study, they can still seek part-time employment. Many colleges and universities offer on-campus jobs for students, and it can help with their resume, too. After all, you’ll want to make sure they’re doing all they can to become gainfully employed upon graduation!

 

Erica Reed is the editor of custom publishing at Bridge Tower Media and the Central Penn Business Journal.

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