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Can You Afford College?
College is expensive. According to the College Board, one year of tuition and fees at a private college averaged just under $33,500 in 2016. That's more than 50 percent of the average income earned by a U.S. household. Paying for college is an investment in the future, but the cost can also be one of the biggest stressors for families. Luckily, there are ways to help pay for college, but it takes time and work to identify them. The first step is figuring out the true cost of attendance. From there you can assess your personal resources and investigate financial aid, scholarships, loans, and other ways to pay for college.
What's the Real Price of College?
Every college publishes a “sticker price,” which reflects the annual cost of tuition and fees. The sticker price can vary dramatically from the actual cost of attendance, however. Factors such as additional fees can add to the cost of college, while scholarships and grants may reduce it. The true cost of college doesn't have to be a mystery, and there are ways to get a peek at what you'd actually have to pay. To begin, it helps to understand the terminology as well as the tools that are available to help predict the true price of college.
Tuition, Fees, and Other Costs
Colleges publish the cost of tuition and fees on their websites, and this information can also be found in college search engines and college ranking magazines. Tuition, which pays for instruction and the operating costs of an institution, varies from college to college and can be as low as $4,000 per year to as high as $55,000 per year. Fees, which support additional campus services such as information technology, health services, and parking, are incremental to the tuition cost. If your child is staying on campus, you can also expect to pay additional costs for room and board.
Expected Family Contribution
The approximate amount of the tuition, fees, and other costs that you'll need to cover out-of-pocket is known as the Expected Family Contribution (EFC). Using various inputs, your EFC weighs parental income, assets, number of children in the household, and other factors. You can find EFC calculators on many websites, and calculating your EFC is an important first step in the financial aid process. An EFC calculation is a rough estimate, however, since it relies on limited data and doesn't evaluate extenuating circumstances. As your child's college search process progresses, you'll be able to develop more precise estimates using other tools.
Net Price Calculator
When your child begins to narrow the list of possibilities, you'll want to look at each college's net price calculator. The calculator is an institution-specific way to forecast the amount you'll pay after projected grants and scholarships have been awarded. Because more scholarships are typically awarded by private colleges and universities than public ones, the calculator is most helpful for these institutions. The calculator can typically be found on each institution's financial aid website.
FAFSA4caster
The FAFSA4caster is another tool to make projections in the process of paying for college. The 4caster allows families to complete a mock FAFSA (Free Application for Federal Student Aid, described in more detail later this in chapter) using financial and personal information to make an estimate of federal financial aid eligibility. You and your teen can also use the data to estimate costs for specific colleges factoring in this FAFSA information.
True Costs
EFC and Net Price Calculators, the FAFSA4caster, and other ways to estimate college costs are helpful, but you really won't know the true cost of each college until after your child has been accepted to the institution and has received a financial aid award letter. Based on that letter, and the details of any financial aid award you may receive, you're in a better position to address the question of whether you can afford college.
Can You Afford College?
Regardless of family income, nearly every parent is bound to ask: Can we afford college? There are ways to pay for college, but navigating the process requires careful thought and planning. Loans, grants, and other means help to construct a plan to pay the bills before, after, and during college.
Ways to Pay for College
Grants
Grants are money awarded to families who show financial need as determined by the FAFSA. They do not need to be paid back and are generally awarded on a yearly basis. Federal grants, specifically the Pell Grant, are the most common grants available for college students. A Pell Grant normally does not cover all of the tuition and fees that students need to pay for college, so they are typically supplemented with other forms of aid.
Loans
Student loans come in many forms, and unlike grants, they need to be repaid. The most common types are Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS loans, all of which are part of the U.S. federal government's William D. Ford Federal Direct Loan Program. Private student loans are also available.
Direct Subsidized Loans are available to undergraduate students who qualify based on financial need. These loans don't accrue interest until after the student has graduated (or left) college.
Direct Unsubsidized Loans are available to undergraduate, graduate, and professional students regardless of family income. Unlike subsidized loans, these loans begin to accrue interest as soon as they are dispersed.
Students can receive a combination of subsidized and unsubsidized loans, but there is a cap on the amount that they receive. These loans typically do not require repayment until after graduation or the student leaves college.
Direct PLUS Loans are available to parents of dependent undergraduate students or to graduate or professional students and can help to pay additional education expenses that aren't covered by financial aid.
Students and families may also be able to borrow additional funds for college through private student loans from banks, credit unions, and other lenders. These loans typically carry higher interest rates than federal loans, but unlike federal loans they can be used to pay other college expenses beyond tuition and fees.
Scholarships
Scholarships come in many forms. Scholarships are funds that do not need to be repaid that students can use for college expenses. For many students, scholarships can be an important resource when it comes to affording college. Often, the biggest scholarships that a student receives are institutional scholarships awarded directly by the college he or she is attending. Institutional scholarships are more common for private colleges and universities than public institutions. It is always a good idea to inquire at the admissions office about types of scholarships available because they may require special applications, auditions, or essays.
Outside scholarships are another way students can earn money to defray the cost of college. These scholarships can come in many forms and with different requirements. They can be offered by anyone, from large corporations to small town community organizations. Some teens treat the scholarship search and application process like a job, and a lot of times their work will pay off. Students should check with their schools on the latest scholarships available, and parents should check with their places of work and worship for availability.
529 Plans
Parents who start saving early can help their teens as they enter college. A 529 or other savings plan can be started as early as birth and are run by individual states. These plans can come in two main forms, a savings plan or a prepaid tuition plan, and they can be used at eligible colleges nationwide. Some setup is required, so checking with a 529 administrator or financial planner can help ensure proper planning and allocation for this program.
Is the ROI Worth It?
The term return on investment (ROI) is widely used in the financial world. But the concept is increasingly used when evaluating college options. Instead of asking, “Can I afford college?” many families and potential college students are being more thoughtful about the potential return on investment from a college education—considering both the time and costs required. Although it can sound transactional, it is a good idea to ask a college what your ROI may be. When evaluating ROI for a particular college or program, consider the net cost of college (including tuition, fees, and expenses less grants and scholarships), graduation rate, time to graduation, typical loan amount, and employment prospects after graduation. Calculators and rankings exist for ROI, but this number is extremely personal and must take into account each teen's unique situation.
Applying for Financial Aid
According to the National Center for Education Statistics, more than 80 percent of first-time, full-time college students are eligible for financial aid, but many families choose not to apply for it because they assume they aren't eligible. As a result, some of these families may decide college isn't affordable or may pay thousands of dollars more than they would otherwise. The best way to know what you're eligible to receive is to apply for aid every year.
What Is the FAFSA?
The FAFSA is the federal form that postsecondary institutions use to evaluate the amount of grants, loans, and sometimes even scholarships for which students are eligible. It uses family tax information throughout its online form, which can then be sent to individual institutions for an evaluation of student aid.
It's a common misconception that completing the FAFSA is a waste of time for anyone making more than $50,000. Every college student should complete the FAFSA every year because it opens the door to scholarship and low-cost loan opportunities. When the FAFSA is sent to a college and matched with an application, the college formulates an award letter. This letter lists the amount of grants, loans, and merit aid that an applicant may receive for that school year.
Another myth of the FAFSA is that the process is too hard. It used to be the case that you had to file (or at least complete) your taxes from the current filing year prior to filing the FAFSA, and even then you had to complete page after page of information. But now the tax information on the FAFSA can be taken from taxes you filed for the previous year and the FAFSA website is easier to navigate than ever before. In fact, the FAFSA has implemented the IRS Retrieval Tool that pulls filed tax returns to autocomplete much of the FAFSA form. The FAFSA website (http://fafsa.ed.gov) has all of the information to walk you through the process of completing the FAFSA. Keep in mind that the FAFSA is a free tool, so you should never be charged to complete or file your forms.
CSS PROFILE
Almost four hundred colleges use an additional form known as the CSS PROFILE to determine eligibility for nonfederal student aid. The PROFILE is similar to the FAFSA but collects more information, including extenuating circumstances that may help your teen qualify for additional funding. Unlike the FAFSA, the College Board charges a processing fee each time you submit a PROFILE form to a college. But like the FAFSA, the PROFILE is well worth the time and effort—and in this case the fee—because it may lead to aid that assists in making college a bit less costly.
Keep in mind that financial aid offers have to be accepted before any money is dispersed. Read the instructions from each institution carefully, and if you have questions, ask your school counselor or the college's financial aid office for assistance. At some point, everyone goes through this process for the first time, and financial aid offices are prepared for this. They can explain each aspect of the award letter to you and discuss the pros and cons of the award.
Build Your Dream Team
Figuring out how to pay for college isn't solely on the shoulders of parents. By starting early and building a team of advocates and experts, you can demystify the process. It is easy to feel overwhelmed when faced with the daunting task of going along this path; creating a financial aid dream team makes the journey much easier.
The dream team of the financial aid process can work hand in hand to make the financial aid process much less stressful. The key to success in the financial aid process is involving stakeholders early in the game and asking questions up front and often.
So who is on this dream team, and how do you even begin the conversation? Although it might differ school by school and college by college, there are some main players who are trained to help you through the process.
School Counselor
School counselors are employed in all states and in just about every high school in the country. Licensed school counselors are trained not only to help kids with emotional and academic questions, but with the college planning process as well. The school counselor is empowered to be a student advocate, a shoulder to lean on, and a source of extensive knowledge about the college admissions and financial aid process. Often school counselors hold financial aid awareness nights and workshops to walk parents of juniors and seniors through the financial aid application process.
College Admissions Counselor
One of the first faces that a prospective student associates with a college is the admissions counselor. The admissions counselor is the first point of contact when it comes to initial questions about financial aid. These counselors are equipped to let you and your teen know the types of scholarships available, what the average merit aid is, and the specifics about tuition, fees, and other estimated expenses. College admissions counselors also tend to know a lot about the FAFSA, so they are a resource in the application process as well. College admissions counselors are there to help, not to be a roadblock to admissions and financial aid.
Financial Aid Office
Every college financial aid office works hand in hand with the admissions office to ensure that applicants have the best and most timely information needed. In turn, teens should feel that they can contact the financial aid office for questions they have. Especially after filing the FAFSA or receiving the award letter, families should lean on the experts in their specific college's financial aid office to clarify any questions they may have throughout the process.
Your Child
Believe it or not, your child can be part of her own financial aid process. Yes, it might be easiest to call on members of the dream team yourself, but the more she is involved in the conversation about financial aid, the more she will feel that she has a stake in the game. Juniors and seniors who are involved early learn communication skills, the financial aid process, and how to advocate for themselves. Kids should know what they are signing and when, and they should be involved in their own loan counseling requirements.
Other Ways to Pay for College
Loans, grants, and scholarships aren't the only way to pay for college. There are some not-so-common ways many people use to supplement the cost of college. Kids can get creative to bank some credits, earn money, and save some money to pay for expenses.
Dual Enrollment
High school students all over the country choose to take dual-enrollment courses to earn credits for college. From a couple of credits through a college in the school's program to a full two years by dual enrollment at a local college, dual-enrollment programs provide a vehicle for teens to get a taste of college-level course work all while saving money through earning credit as a high school student. Credits from dual-enrollment programs transfer to many colleges, but not all of them. Check with colleges you're considering before committing to an intensive dual-enrollment program.
Testing Out
Some options allow teens to show that they can do college-level work through taking tests. Some of these tests occur while the teen is still in high school and some just prior to coming to campus for their freshman year of college. Although these tests might not be a one-to-one match with classes, they may help students to avoid zero-credit courses or enroll in the next most rigorous course in their college major.
Advanced Placement (AP) and International Baccalaureate (IB) tests are one way that high school students can get a jump start on college credit. To earn college credit, students must take the correlating course in high school and then pass the exam at the end of the school year. Not all colleges offer credit for AP or IB courses, and when they do, it's at varying degrees. College admissions counselors can assist with this topic throughout the admissions process.
Colleges may also offer students the chance to earn credits or to skip introductory courses through various exams. Placement exams are designed to ensure that new students are in the correct course and that they are ready to take college-level classes. Those who do not score high enough on these exams are sometimes placed in remedial or zero-credit courses, which add to tuition fees.
CLEP allows students to take exams that many colleges recognize for college credit. As with AP and IB exams, not all colleges accept CLEP for credit or in the place of required courses. It is always recommended to check with the college prior to taking these exams.
Military
The military presents a variety of options when it comes to postsecondary opportunities. Typically people imagine joining the military as going off to boot camp and immediately beginning active duty. This route can help students pay for college (with the GI Bill), but if the initial goal is to attend college directly after high school, there are ways to be active in the military and be on campus at the same time.
One of the most intense postsecondary military experiences is to go to a military academy. Here, there is no tuition for students. Military academies are typically extremely competitive and require service after graduation. A more common path that students take during college is through a Reserve Officers' Training Corps (ROTC) program. ROTC allows students to attend a traditional college or university while being involved in ROTC programming outside classes. ROTC students typically receive full tuition with expenses paid, and there is a military enlistment requirement following college graduation.
A Balancing Act
If you commit to paying for college, there are ways to do it. For most families, there will be some give-and-take and sacrifices that need to be made. There are questions that parents should ask themselves and their children, as well as questions that should be asked of colleges. By going through this checklist and responding honestly, you can truly answer the question “Can I afford college?”
“Are we willing to take out loans?” Do you want only student loans, or are parents willing to take loans as well? Are you willing to take unsubsidized loans? Can you be flexible in your child's college choice? A big discussion in college fit is whether the college is affordable. Don't discount colleges that may have high sticker prices but provide a lot of merit- or need-based aid.- “What's the backup plan?” Sometimes the ROI for a college is just too low. What is the backup plan for this? Is starting at a community college an option? Does it help to take dual-enrollment credits or to add to the list?
- “What's the plan?” Is there a set price that parents will pay toward college out of pocket? Will a summer job be required? Who pays for books and other expenses? Who will be paying back the loans?
These questions along with some self-reflection will help you to create a plan to pay for college. Students should be involved every step of the way so they can remain informed and begin to develop lifelong financial decision-making skills. Paying for college is not always easy, but it can be done.