Financing Higher Education

You and your family have spent years saving for college. Now you're applying to schools, and it's just about time to put those dollars to work. Have you saved enough?

Your first step is to look at costs. Be sure to look further than tuition! The true cost of a college education includes not only tuition, but mandatory fees, room, board, and other items such as books, travel, and miscellaneous living expenses. Mandatory fees, in particular, can be significant, in some cases meeting or even surpassing tuition. To find the true cost at a specific institution, you can consult with the admissions office - being sure to specify that you're looking for the total cost, not merely tuition.

If your savings don't meet these figures - even if they pale in comparison! - this is not the time to compromise your goals. Students and their families are not expected to meet the total cost of a college education. Instead, most schools use a standard formula that calculates your Expected Family Contribution (EFC), which is based on family income, assets, and expenses. (To calculate your EFC, visit this site.) The remainder of the cost qualifies for financial aid: a combination of grants and scholarships, loans, and work-study earnings.

Grants and Scholarships

Grants and scholarships are gifts: they need not be repaid. Most grants are awarded on the basis of financial need, but merit scholarships are also available, based on student achievement in academics, sports, arts, or other areas. And some grants and scholarships are awarded as employment benefits. Universities, for example, often give their employees a break on tuition for themselves and their family members.

The federal government sponsors several grants for undergraduates, most of which are based on financial need. For information on federal grant programs, visit this site. Dozens of web sites offer free searches for private scholarships. (Don't fall for offers that charge fees, either to search for scholarships or to apply for them!) This site provides links to a number of scholarship search sites.

Student Loans

Loans are another form of financial aid. The federal government offers students several types of loans with low interest rates; with a subsidized loan, the government even pays the loan interest while you are in school. In addition to these student loans, parents can apply for a government-sponsored PLUS loan, using an application that you can get from your high school. Parents can also apply for a private loan through a bank; for borrowers with good credit, a bank can sometimes offer better interest rates than the PLUS rate.


Work-study programs are also considered financial aid. These are jobs designed to accommodate a student's needs. Most are subsidized by the federal government, are located on campus, coordinate with the school schedule, and require less than 15 hours per week. (Studies show that working 15 hours or less per week benefits a student's academic performance; working more than 20 hours per week, on the other hand, tends to be detrimental.)

Applying for Financial Aid

To receive any form of financial aid, you must take action to apply. Your first step is to submit the Free Application for Federal Student Aid (FAFSA). You can fill out the application online here. The processed application will be sent to the schools that you specify, and a report identifying your Expected Family Contribution will be mailed to you. Some schools and private scholarship programs also require the PROFILE financial aid form, which you can fill out and submit by visiting this site. Submit these forms as soon as possible - typically, they're available in October. Parents must apply for PLUS loans separately, by filling out an application available from your high school. For private grants and scholarships, you must submit the appropriate applications, as well; read the information about any grant or scholarship carefully, and be sure to comply with the instructions.

Along with (or shortly following) your letter of acceptance to a college or university, you will receive a description of your financial aid award: the amounts and types of government grants, loans, and school-supported work-study positions being offered. Read the letter carefully, and be sure to respond if you're required to do so.

Note any limitations applied to grants and scholarships: Are you required to maintain a certain grade point average, or to continue playing a particular sport, in order to keep the scholarship? What happens if you don't meet those requirements? Will the amount of the scholarship be affected by any private scholarships that you win, or by changing financial circumstances in the family?

Note the terms of any loans that are offered: What is the interest rate? Is the interest paid by the government and, if so, for how long? When do you need to begin repayment? How much will you owe by graduation? Will the loan amount increase in subsequent years?

Ask questions about work-study programs, as well: Is the job guaranteed, or do you need to find a job? How many hours per week will you work? What is your hourly wage? Will you be paid directly, or will your student account be credited?

Ideally, financial aid should cover the difference between your Expected Family Contribution and the full cost of college attendance. In reality, financial aid is a finite resource, and many families aren't offered that much. There are several steps you can take to reduce the difference between the two figures.

First, consider the tax breaks that accompany college spending. The Hope tax credit or the Lifetime Learning Credit allows you to subtract some of the money spent on college tuition and fees from your total federal tax bill. If you choose not to claim a tax credit, you can claim a federal tax deduction for college spending. A qualified accountant can provide more information on these tax credits and deductions.

Just as college expenses include room and board, a student leaving the nest may yield savings in the home budget. Be sure that you will manage your room-and-board money wisely while at school: budget for your true needs, and avoid unnecessary temptations.

What Next?

If, even after considering these savings, you find that the amount of aid offered would leave the college out of your financial reach, you can appeal the aid award. Be sure that you have a valid reason for disagreeing with the aid office's determination: don't appeal simply because you'd like a larger aid package! If the aid office has overestimated your family's ability to pay, if you omitted pertinent information from your aid application, if your family's financial circumstances have changed, or if another college has offered a better aid package, then you may have good reason to appeal. Read the aid letter carefully, to be sure that your objections haven't already been addressed. If you still feel that an appeal is in order, take note of any appeal procedures specified in the award letter. Collect written documents that support your position, such as income statements, expense records, or another college's award letter. Then phone the financial aid office and request an appointment. Keep in mind that financial aid officers are not your adversary; on the contrary, their job is to help students afford to attend their school. Approach them respectfully, as partners, and even if they deny your appeal, listen to any advice they may have.

If you haven't already done so, apply for any private scholarships whose criteria you might meet. Look for full-time summer employment, and use your summer earnings to offset your college costs. Look into private bank loans to supplement government loans.

If you have taken advanced courses in high school, look into tests such as the CLEP and DSST that can earn college credit for work you've already done: some students can "place out" of enough courses to effectively skip freshman year.

Finally, consider attending a less expensive school. You may well find that the price tag doesn't always reflect the quality of the school.

In today's world, a college education is expensive, but the options for financing it are numerous. Regardless of your financial position, a college education is not out of reach.

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