By Francine Schwartz - Pathfinder Counseling LLC
It is early January. For most high school seniors college applications are completed and there is a palpable sense of relief in the air. For their parents however, the stress is ramping up. There is anxiety surrounding financing the college education, often the second largest investment following the purchase of a home. Not to worry. I’ll share important information that will help you navigate the financial aid process and maximize those college dollars.
Begin Early: College is an investment in your student’s future, therefore it is important to plan as far ahead as possible to ensure the best possible return. One rule of thumb is to finance college in thirds with 1/3 of college expenses funded through current income, 1/3 from savings and 1/3 from financial aid. Whatever your individual financial situation may be, it is important for students and parents to communicate about the amount that the family can realistically afford. I always advise students to have a financial safety school: one that they can afford to attend should they not receive sufficient financial aid from the college or other sources, or if their family financial circumstances change.
How much does College Cost? The costs of college include direct costs such as tuition, fees, and room and board and indirect costs such as books, supplies, transportation, and other miscellaneous expenses, like those midnight pizza runs. Annual college costs can range from $3,400 at a community college to over $60,000 for a private university. One little known program is “tuition break for New England residents.” This program provides a tuition discount to New England residents when they enroll in approved degree programs at out-of-state public colleges and universities throughout New England. Visit www.nebhe.org/tuitionbreak for additional information.
What are the types of Financial Aid? There are two primary types of aid: Gift Aid, money that does not have to be repaid, which usually includes scholarships and grants, and Self-Help, which includes loans, and work-study.Federal tax incentives, although a relatively small component of financial aid, helps families recoup some of the money they have paid out for higher education.
Scholarships, or “merit aid”, are awarded to students in recognition of academic, athletic, artistic, or leadership abilities. Institutional aid comes directly from the colleges that award scholarships to students whom they wish to attract to their school. Many corporations, non-profit agencies, religious organizations, civic organizations, employers and unions have scholarship dollars. Often relatively few students apply for these, increasing your chances of being an award recipient. The school guidance office maintains lists of scholarships and their requirements. Frequently an essay and/or recommendations are necessary to apply. Finally, there are legitimate online sources of scholarships where students complete a profile and receive email notifications for scholarship opportunities that match. One of the best web-based resources is: www.fastweb.com. Please be aware ofscholarship scams on the web.
Grants are awarded to students based on their financial need. The Pell Grant is the largest need-based grant provided by the federal government. Pell Grants are only given to students who show a high degree of financial need based on the Free Application for Federal Student Aid (FAFSA). Apply online at www.fafsa.ed.gov. Families can attend a free FAFSA help session on College Goal Sunday, Checkwww.collegegoalsundayusa.org for times and locations. Grants are also available through colleges, state agencies, corporations, non-profit agencies and civic organizations.
Work-study enables students to earn money for college expenses by designating an amount of money and providing the opportunity to secure a job, usually on campus. Eligibility for work-study is based on financial need.
With college costs increasing each year families are relying more heavily on loans.
The federal government offers low interest loan opportunities for both students and parents. These programs include the Federal Direct Stafford Loan and Perkins Loan programs for students and Direct PLUS Loans for parents and graduate students. To qualify for any of these programs families need to complete the FAFSA. If a subsidized loan is awarded the federal government pays all accruing interest while the student is attending college and during the six month grace period after the student leaves college. Subsidized loans are based on financial need. Unsubsidized loans are not based on financial need and interest is charged as soon as the disbursements are made. Be a savvy consumer if you choose to borrow and limit the amount of student debt.
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