HOW TO FINANCE YOUR COLLEGE EDUCATION

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1 HOW TO FINANCE YOUR COLLEGE EDUCATION If financial aid, whether need-based or merit-based, is going to be essential for you to attend college, please do not limit your choices by eliminating colleges that are more expensive. Given that those higher-priced colleges often have substantial financial resources, you may find it costs the same amount to attend Unbelievably Expensive U. as the more modestly-priced colleges. If you have read any college news lately, you will understand how quickly the financial aid picture is changing and how important it is to have all of your facts straight before you write-off a school as too expensive. If you are not sure if you will qualify for need-based aid, don t assume you will not. Talk to an expert in this area. We have resources, so ask a college counselor or contact the financial aid offices at schools on your list. Need-based financial aid provides money (loans, grants, work-study, and sometimes need-based scholarships) to supplement what families can afford to pay. And, similar to Whitfield, colleges expect parents to bear the primary responsibility for their children s education. Merit-based scholarships are awarded to students for all sorts of reasons a particular talent or academic intellect and families financial resources are not considered when offering these merit-based awards. You would be wise to complete the Free Application for Federal Student Aid (FAFSA) estimator, which is called the FAFSA Forecaster, junior year, if not earlier, to understand both how much you will be expected to contribute to your child s education and how much federal financial aid (loans, work-study, and grants) you might receive. In addition, some private colleges require the Profile, or their own form, which offers similar estimating tools for parents. Sometimes parents are anxious about releasing personal information to these Web sites. Please understand that these two estimators are valid, real sites. They are committed to making the data families provide as secure as possible, and families will be required to submit this same information to these sites during the admission process in order for your children to be considered for financial aid. By November 2011, colleges and universities will be required to have a net price calculator on their web sites with the hopes that this will provide families with more accurate financial aid estimates for each campus. There are many reasons why this may not be the most valid way to figure out costs. However, it is worth looking into this resource as you narrow down your lists. HOW DO I APPLY FOR NEED-BASED FINANCIAL AID? The two most common forms required to qualify for need-based financial aid are the aforementioned Free Application for Federal Student Aid (FAFSA) and the Profile (CSS Profile). The latter is used by many private schools to more specifically determine your aid 1

2 package. Check with the school you are applying to as some have their own form instead of the Profile. Like some college applications, the CSS Profile (provided by the College Board) is in two stages, with Part I available online at the beginning of the school year. Part I is used as a registration tool. Once you complete Part I, the College Board can customize an online application for you. There is a charge for registering to fill out this profile. The FAFSA, which should be filed as soon after January 1 as possible (of the year that your student will be attending college), is available beginning January 1. The federal government prefers that families complete the FAFSA electronically. We have found that when families file their FAFSAs electronically, they are awarded their financial aid packages earlier, and they can catch mistakes more quickly and easily. When you complete the FAFSA, you will discover what the EFC (Estimated Family Contribution) is for your situation. Do not panic when you see this number, as many colleges and universities will offer more aid to supplement costs than this figure shows. Some colleges may have institutional forms you need to complete and submit. Ask questions, check deadlines, and generally stay informed. HOW IS NEED-BASED FINANCIAL AID MONEY ASSIGNED? Work-Study Jobs Colleges are going to assign these funds first, as they cost the colleges little or no money. Students typically work hours a week in a variety of jobs across campus. If you have any special talents (for example, you are a lifeguard or you have your chauffeur s license) or you have specific interests (doing biology research), please let the college know this when completing work-study paperwork you may be assigned to a job other than the library or the food service, typically the two largest employers on campus. Federal and State Loans There are a variety of loan programs available. While federal loans are subsidized, their rates and payment schedules vary. Please calculate what your total loan debt will be after four years. What kind of monthly payment will this be? Are you intending to go to graduate school? How much more debt will you have to assume? States, local banks, and other lending institutions offer loans, but the federal loans are typically more economical. Remember, loans are a wonderful tool for financing a college education but please use them judiciously. Research into the loan agency you intend to use some lenders have been known to make side deals with colleges to get their business, which is not to the benefit of you as the consumer/loan holder. Scholarships and Grants These are the last resources to be assigned as they cost the college money. The nice thing about them is that they do not need to be repaid. However, there may be strings attached to these awards. For instance, students may have to maintain a certain grade point average in college in order to renew their scholarships each year. 2

3 Depending on the school, students receive scholarships for a variety of reasons. In the past, we ve had students awarded money for their strong academic record, their leadership in the community, and their athletic talents (solely at the Division I or Division II or NAIA levels) among other things. Missouri also offers a variety of academic scholarships for students who maintain a high grade point average and who score in the top percentiles of a standardized test for college admission; the most prominent of these awards is Missouri Bright Flight Scholarship. Students who demonstrate the most need may be awarded a Pell Grant. HOW DO WE FIND OUT ABOUT HONORARY SCHOLARSHIPS? As you research colleges and universities, please take the time to find out if schools offer honorary scholarships, that is, scholarships that have no bearing on a family s financial need. If these scholarships are available, what do you need to do to be considered? Ask about the profile of those students who receive the honorary scholarships so you can know how competitive you are for these scholarships. Some schools will only require that you apply for admission, while others will require additional essays and perhaps a campus visit if you are chosen as a finalist. For a little bit of work, you could be eligible for some substantial scholarship dollars. Colleges are the best source of the most substantial honorary scholarships. SHOULD I APPLY FOR OUTSIDE SCHOLARSHIPS? There are a number of scholarships offered by Chambers of Commerce, civic organizations and religious organizations. Sometimes the amounts are modest and you would have to receive a number of these to make a dent in a college bill. However, the smaller, regional competitions like these have fewer students applying for them and therefore your chances of winning are much greater. FastWeb is a good resource for free information on scholarships that might match your interests. One question you need to ask of your colleges is how they treat outside scholarships. Some colleges may let you bring in all of this money; others may reduce their financial aid packages to you. Always ask! THINGS TO KEEP IN MIND You cannot receive financial aid unless you apply for financial aid. This is an appropriate and necessary area for parent involvement as they fill out the majority of the paperwork. Timely completion of the need-based financial aid materials is essential. Like your college applications, make a chart of the various deadlines. Parents need to complete their taxes promptly as part of the need-based financial aid application process. Proofread everything that you submit. Be sure to double-check social security numbers, dollar amounts, etc. Review everything again when you receive your need analysis report. Mistakes may alter the amount of money you receive. 3

4 When you receive your need analysis report, you will find the EFC (Estimated Family Contribution). Know that this may not be the amount you receive from each college; some colleges meet full need, others do not. Some recalculate the figures which therefore alters your EFC. Ask colleges if they meet full demonstrated need. Colleges interpret financial information differently so your packages can be radically different from one college to the next. Generally, the higher the income, the lower the financial need. However, high income does not preclude a family from receiving financial aid. Other factors colleges may consider include family obligations (number of children in college or prep school, caring for an elderly relative), unusual expenses and parents who are close to retirement. As long as both parents of the financial aid applicant are able to be contacted, they will need financial information from both parents, as both are still considered to be responsible for assisting with paying for their child s education. Parents who are divorced, separated or have never married would be wise to talk with college financial aid offices about their particular circumstances; colleges may request that you provide a copy of your parenting agreement. If you are a recruited Division I or II or NAIA athlete, you should still complete the financial aid paperwork. The financial aid office may be able to offer more money than the coach. And, unless a family wins the lottery or the student is earning poor grades, need-based financial aid usually is not taken away. File the forms early and keep copies of everything. Many financial institutions have information available about financing for college, whether online or materials for you to pick up. Additionally, the financial aid offices at the schools will be happy to answer questions and offer advice. When you receive your financial aid package, review it against others from other schools. If you feel you cannot meet the expected family contribution for a particular school, but can for others, it is appropriate to politely contact that school to let them know. Some schools will work with another school s financial aid package if you provide it for them and may even meet or exceed the offer. Again, carefully analyze what you are being given how much in loans, how much grant money, etc. It is essential that you complete financial aid paper work early and accurately. Often the school s financial aid coffers are empty after the majority of awards are given in March. Seldom is need-based financial aid money available to students who are admitted from a wait list. It is also less likely to be available to transfer students. Please be a smart consumer. You should never pay someone who guarantees to find you college scholarship money. Such companies are doing work you can do yourself for free. Please review your financial aid awards carefully and ask the financial aid office any questions you have (which may be some of the following): 1. How much of the package is comprised of loans? Are those loans renewable yearly? 4

5 2. Is the whole package renewable for four years? Assuming your family s financial circumstances remain relatively the same, will the college continue to meet the same percentage of need every year? Will the ratio of gift money to loans change? 3. What will your debt load be after college? What are you planning to do at that time? Loans are a wonderful supplement in the financial aid process but you need to look clearly at the debt burden as it relates to career and graduate school plans. 4. What happens if you need five years to complete your degree? Is the financial aid available for five years? What would that package look like? Created by Whitfield School College Counseling 175 Mason Road St. Louis, Missouri Updated: July