Director of College Counseling
HOW WILL I PAY FOR COLLEGE?
According to the Wall Street Journal, the average college graduate’s student loan debt is at a whopping $37,172 and that’s just the average! The most recent data from the Federal Reserve Bank of New York shows the overall student loan debt in America hovering just over $1.3 trillion. Trillion!
We all want our kids to go to college debt free (for them AND for us!). But how can we make this possible? What are the ways to pay for college? Well, read on and find out.
First of all: KNOW WHAT YOU CAN AFFORD! No school, no matter how elite, is worth graduating with hundreds of thousands of dollars in debt! Parents and students NEED to have a conversation about paying for college well in advance of May 1st- the National college ‘commitment day’.
Is there a college fund? How much can parents pay per year...how much are parents willing to pay per year? Start the conversation with your high school student now!
Second, make sure to take care of yourself first- pay off debts, pay your mortgage, pay into your retirement fund. Don’t forget to take care of YOUR future and your own money goals before saving for college for your child.
Finally, know how much college may cost for your child. If you can estimate this, then you will have a better understanding of just how much you will need to save and can make a well thought out plan from there.
The first step toward getting a realistic understanding of how much a college or university will cost is to use the Net Price Calculator and Estimated Family Contribution Calculator. Many colleges and universities use the College Board’s Net Price Calculator and EFC calculator to estimate how much the student’s family will be expected to contribute for the year. Other colleges and universities have developed their own net price and estimated family contribution calculators.
The Net Price Calculator is a tool that helps you estimate your “net price” (net price = what you will be expected to pay at a specific college or university for one year minus any grants or scholarships for which you might be eligible). The EFC is the expected contribution each family is deemed able to provide each year towards the cost of college.
HOW DOES IT WORK?
The Net Price Calculator looks at the “sticker price” of a college, uses your financial information (which you enter), and then estimates the amount of money your family would be expected to contribute to the cost of college. The Net Price Calculator also evaluates your eligibility for financial aid.
Remember - it is possible that a college with a high sticker price might end up costing less than a college with a low sticker price, and the Net Price Calculator can help you to estimate “financial fit” at a variety of colleges and universities.
Because it can be tricky to find the Net Price Calculator on each school’s website, I suggest you consult this list of schools with links to their Net Price Calculators, compiled by U.S. News & World Report.
WHAT ARE THE TYPES OF FINANCIAL AID?
NEED BASED:
Loans: these have to be paid back to the lender
Federal aid offers Direct Subsidized and Unsubsidized loans. The difference between these two loans is that subsidized loans are based on financial need and the interest does not accrue while the student is in college, as the interest is paid by the federal government. Interest begins accruing for Direct Unsubsidized Loans as soon as the loan is taken out.
PLUS Loans: This is a fixed rate federal loan for parents of dependent undergraduate students. Our advice is to look into other private lending options as well to make sure you are getting the best interest rate available.
Grants: A Grant is money the government provides for students who need it to pay for college. Grants, unlike loans, do not have to be repaid. Eligible students receive a specified amount each year under this program.
Work Study: Federal Work-Study provides part-time jobs for undergraduate and graduate students with financial need, allowing them to earn money to help pay education expenses. The program encourages community service work and work related to the student’s course of study.
MERIT BASED:
Scholarships are also money awarded that does not need to be repaid. Scholarships can be awarded based on academics, special talents, leadership, athletics, or other aspects that specific schools, companies, community agencies, and organizations would like to recognize and reward. Some scholarships at colleges are automatic while others must be applied for.
It is important that you check each school’s website for information about merit aid/scholarships. Some schools might require a separate application and also could require you to submit additional letters of recommendation and additional essays.
FastWeb is a great scholarship search engine for outside scholarship opportunities. Also, check with any organizations or affiliation groups you or your family belong to. They may have scholarships available.
RaiseMe enables students to earn micro scholarships throughout high school, starting as early as 9th grade, for doing all the things that best prepare them to succeed, whether that’s getting good grades, volunteering in the community or joining an extracurricular activity.
FORMS
The most common form for financial aid is the Free Application for Federal Student Aid (FAFSA). This is required by every college and university if you apply for financial aid. There is no fee connected to the FAFSA and filing the FAFSA determines your eligibility for Federal financial aid funds, the backbone of most college financial aid programs.
* Note: Both students and parents will first need to register for their own individual FSA ID/PIN numbers. Registering for an FSA ID is the easiest way to make sure the financial aid process runs smoothly as it allows users to electronically access personal information on the FAFSA web site as well as electronically sign a FAFSA.
Prior-Prior Year (PPY) refers to a policy enabling students and families to file the FAFSA using tax information from two years ago. For example, a high school senior planning to enroll in college in Fall 2020 will file the FAFSA using tax information from 2018. The FAFSA opens up annually on October 1st. Students and parents should complete the FAFSA as close to October 1st as possible. Also, many colleges have financial aid deadlines- it is very important to know these!
**Please note: www.fafsa.com and www.fafsa.net are the Web sites of private companies who will try to charge you money to fill out your FREE Application for Federal Student Aid. Avoid these sites!
2. The second most common form needed for financial aid is the College Scholarship Service Financial Aid Profile (CSS Profile). The CSS Profile is what colleges and universities use to determine how much non-government financial aid they can award. Most often, private colleges and universities are the ones to require the CSS Profile, however it is your responsibility to check with your colleges and the official list of CSS Profile schools to determine if you need to file a CSS Profile. The CSS can be filled out beginning October 1st. Unlike the FAFSA, the CSS requirements can differ from school to school (deadline dates, whether it needs to be completed every year, which parent/s need to fill out, etc.).
3. The third most common form needed for financial aid is individual college and university institutional forms. Many colleges have online financial aid applications. Make certain to check on the availability of these forms. If you have questions, do not hesitate to contact the college’s financial aid office for assistance and guidance during this process.
After they are submitted online, the FAFSA and CSS Profile are sent to central agencies to be processed and forwarded to the colleges to which you plan to apply. Families complete only one FAFSA and one CSS Profile. Institutional forms, on the other hand, are requested directly from each college and submitted to its financial aid office.
GATHER YOUR PAPERWORK AND INFORMATION
What you need varies by application, but a basic checklist includes:
- Your Social Security Number
- Your Alien Registration Number (if you are not a U.S. citizen)
- Your federal income tax returns, W-2s, and other records of money earned. (Note: You may be able to transfer your federal tax return information into your FAFSA using the IRS Data Retrieval Tool.)
- Bank statements and records of investments (if applicable)
- Records of untaxed income (if applicable)
- A FSA ID to sign electronically
- If you are a dependent student, then you will also need most of the above information for your parent(s)
- Here is a helpful link that will help explain the CSS Profile vs the FAFSA.
SAVING FOR COLLEGE
Beyond financial aid, loans, and merit based awards and the ever elusive ‘full ride’, having a college fund is the optimal way to pay. But what is the best way and when should you start saving? Well, one answer would be to start saving the moment you find out you will have a child. We all know however that this isn’t always possible or probable. Let’s just say- it’s never too early, and if you can save anything, then it’s never too late to start!
529 PLAN:
There are 2 types:
Pre-Paid Tuition Plans: You lock in current tuition rates at in-state public institutions. If your child decides to go to a private or out-of-state institution, you might receive only a small return on your original investment.
Savings plans: You contribute regularly and rely on the account’s earnings to grow. You take on more investment risk but give your child the opportunity to use the funds at public and private schools nationwide.
Note that you CAN shop around from state to state. You do not have to automatically get the 529 Plan offered in your home state. Check out this article to help you learn more about 529 plans and which may be the best for you.
EDUCATIONAL SAVINGS ACCOUNTS or EDUCATIONAL IRA:
An ESA allows you to save $2,000 (after tax) per year, per child. It grows tax-free! If you start when your child is born and save $2,000 a year for 18 years, you would only invest $36,000. While the rate of growth will vary based on the investments in the account, you’ll likely earn a much higher rate of return with an ESA than you would in a regular savings account—and you won’t have to pay taxes when you withdraw the money to pay for education expenses.
UTMA or UGMA (Uniform Transfer/Gift to Minors Act):
An UTMA/UGMA differs from ESAs and 529 Plans in how they aren’t designed just for education savings. The account is in the child’s name but is controlled by a custodian (usually a parent or grandparent). This person manages the account until the child reaches age 21. At age 21 (age 18 for the UGMA), control of the account transfers to the child to use any way they choose.
WHAT ELSE?
If a student is considering applying for a school as an early decision candidate BUT is hesitant to do so because of the cost, call the financial aid office and ask if they would be willing to do an early financial read and give you an estimate on what your estimated family contribution would be.
10 Strategies to reduce your "EFC"- I’m putting this here just in case you want to read it. Game the system? Nah, just an interesting article.
Once all the acceptances come in, award letters are sent and financial aid packages are finalized- that is when the determining factor of where to commit takes place. Make sure to sit down with your child and again, have the conversation about funds and paying for college. Review everything. Don’t be afraid to reach back out to a college’s financial aid office to see if they’d be willing to reexamine your aid package and merit awards. The worst they can say is no. But if there is a discrepancy between very similar colleges in what they are awarding you, it never hurts to ask. Also, if something changed affecting finances between the time your child applied to the college and when the award package came in, let them know this information as this could have an impact on the award/aid offered. Best of luck to you. The college search and application process can be really fun! The paying for it part-not so much. However, if you are well informed, then you can be well prepared and hopefully, get through this with minimal financial impact.
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