Paying For College FAQs
This is a topic that can sound pretty complicated. The current recession has impacted each family's personal finances, and also the generosity of colleges as their endowments have shrunk. This section will address the following topics and give you the tools to understand how you'll be able to manage the costs of college.
For a start, you should think about two things:
- How much will we be expected to pay? See the EFC section below.
- Have a conversation with your family to see how much you can afford to pay. How much can parents afford, and how much will the student contribute? How does your family feel about borrowing money for college?
The good news is colleges who admit you want to help you figure out how to pay for your education. Soon after you send off your college applications, usually in the fall and winter of senior year, you will apply for financial aid at the same institutions. Inside the "fat envelope" of acceptance, besides a heart-felt congratulatory note from the Dean of Admissions, is a financial aid package.
You will have applied for aid using either (or both) the FAFSA, the CSS/Financial Aid PROFILE and/or an aid application form designed by the college. If you are applying to lots of schools, you may fill out all three or more kinds of forms! The personal financial information you provide comes directly from your, and your parents' IRS Tax forms.
Both FAFSA and PROFILE are online programs that you fill out and submit electronically. After a few weeks you get a report back from each agency with an explanation of your financial profile as it relates to college expenses. You then submit this report to schools you are applying to. Even before you are a senior, in fact, any time you want, you can fill out a FAFSA estimator and immediately get an idea of how colleges will see your family's finances. Links to these programs and other relevant websites appear on the links page.
The FAFSA is available on line on October 1 of your senior year and should be completed and submitted in early January, and amended later in the spring if needed. Colleges that use the PROFILE form, or their own financial aid calculator may require you to submit those forms at the same time you apply to college, sometimes as early as November 1st, if you are applying in an early decision cycle. You can update the information on these forms and resubmit them if the numbers change before your final financial aid package has been presented to you. The IRS and FAFSA cross-reference each other, so the numbers need to match.
The most important number that comes out of the FAFSA, CSS Profile or institutional computation is the Expected Family Contribution (EFC). You and the colleges will be using this number to determine how much money you will be expected to pay each year. The next section deals with this topic in detail.
TIP! You and your parents will need to be able to access your prior year's tax forms to fill out financial aid forms. Both FAFSA and CSS Profile offer an IRS Data Retrieval Tool to extract your tax return data for financial aid calculation. Filing taxes electronically expedites this process, and minimizes the chances of the college's financial aid office auditing your aid appication form.
The starting point for all financial aid packages is your family's EFC (Expected Family Contribution). This is the amount you will be expected to pay each year for college, and is based on the income and assets of both you and your parents. Your EFC does not change depending on the cost of the school. If the formula says you can afford to contribute $10,200 per year out-of-pocket, that's what you'll pay whether the cost of the school is $12,000 or $72,000. Each college to which you are accepted will present you with an aid package that will describe how you are to pay for the difference between your EFC and the cost of the college including tuition, housing, books and fees. This difference is also called your "need." Here's a good EFC Calculator.
Once you're admitted, you will receive a description of the financial aid the college will make available to you. Sometimes this is included in the envelope with your acceptance letter. Some colleges send the information in a separate envelope or in an email. There can be many line items and amounts in the package. If you are unsure of the meaning of the entries on your aid package, we can help with this. It's critical to know what your actual cost of college will be, and to make a careful decision about whether and how much to borrow in student loans.
TIP! To get the best financial aid package, apply to schools where your academic statistics are well above those of the average admitted student.
- Don't have to be paid back
- Both public and private schools offer grants.
- Grants can be federal, state, from the college or from an outside source.
- Often, you're automatically applying for grants when you apply to the school.
- Scholarships are often given for academic merit, leadership, or talent the student brings to the college, such as athletic or musical ability.
- Annual scholarship renewal is sometimes dependant on maintaining a set grade point average (GPA) during college.
- Contrary to popular myth, most grant/scholarship dollars come from the college, and not an outside source. In fact, outside scholarships are often simply subtracted from the grant or scholarship the college would have otherwise given the student. Your "expected family contribution" stays the same.
- Don't overlook Idaho State Board of Education Scholarships for students planning to enroll in Idaho colleges.
TIP! Merit scholarships, based on test scores and grades, awarded by schools are "free money." Every GPA point and SAT/ACT score improvement can result in an increase in scholarship or grant money.
Examples of Grants:
Federal Pell Grant, maximum $5,815. Based on need.
Federal Supplemental Education Opportunity Grant, $100-$4,000 per year, school grants them at their own discretion, regardless of need.
- Need-based loans: these are loans designed to help you meet your "need", not pay the EFC that, in theory, you have saved for or can "pay as you go."
- Very low interest
- No interest due while the student is in school more than half time
- No pre-payment penalty, origination fees or insurance fees
TIP! Parents, you can keep your money in the bank, and let the student take out low-interest, deferred payment, zero pre-payment-penalty loans. You can then pay the loans off at graduation. This strategy can make the student very aware of the real cost of college, and might work as extra motivation to finish.
Read more about Federal Student Loans!
- Higher interest rates than student loans
- Repayment begins soon after loan origination
- Be very careful when shopping for loans- know the terms. Being offered a loan by a college is not really "meeting need" but simply directing you toward a possible source of funds to pay for the EFC and/or unmet need.
Examples of non-need based loans parents may be offered:
PLUS Loans: federally subsidized; amounts up to the cost of college minus financial aid received; even those with poor credit histories can sometimes qualify. Repayment begins while student is in school. These can be tricky, because you can borrow very large amounts and incur large debt quickly.
- Student earns money at an on-campus job
- Students selected for this program choose from a range of on-campus jobs
- Income is exempt from future aid computations
- Student has some "skin in the game"
- Students who work often have better GPAs than those who don't
- The jobs are often compatible with fitting in some study hours while on the job
- The student can resign if it's just not working out
- Generally, students can earn up to $3,000 per year under this program
- Don't accept admission to any school until you've compared all the financial aid packages.
- Find out if the package is renewable, or guaranteed for four years, especially for athletes who may not participate in their sport all four years!
- You can negotiate with two colleges of the same selectivity if one is offering a significantly different package. If you decide to contact the college's financial aid office, be calm, reasonable, and have a clear idea of what you are asking for.
- It's OK to accept awards from several schools while you decide which one you really want to attend. Meet all deadlines for notifying schools of your decisions about financial aid and admissions.
Sooner or later, most families find themselves addressing the uncomfortable question of how to pay for college. As one Dad said, "No matter how much you've saved, it's never quite enough!" This can be a scary topic to bring up around the dinner table: students are sometimes afraid to hear that they likely won't have the freedom to choose any college, without regard to cost, and parents dread having to tell their children that, in spite of their best efforts, this is indeed the case. The trust is, there are colleges at every price point. Be up front about financial resources, and come see us for more information about finding a financial match for college.
It's important to start the conversation, however, and talk about the real numbers: exactly how much money has been saved for college, and how much the parents and student are willing and able to contribute, on top of these savings. The family can then work as a team to find a financial match in a college that also meets the other qualities on their wish list.