CHAPTER NINE
For many teens, college is the biggest expense of their lives so far. Fortunately, there is a lot of financial assistance available for getting that degree.
Most people can’t afford to just pay for college. You would have to be quite wealthy to cover six figures’ worth of college costs without blinking an eye. That’s why it’s important to understand all of the tools out there to help you.
Planning for college costs should start long before you head to campus. Some parents start saving before their kids are born! But even if you are in your last year of high school, it’s better late than never. Online calculators can help you figure out your estimated family contribution for college, based on income and other factors.
When you are in high school, you and your family should fill out the Free Application for Federal Student Aid (FAFSA). This is the starting point for determining your eligibility for loans, work-study, and other programs created to help students pay for college. Fill it out even if you think your parents have too much money to receive aid.
$18,391. That’s the average cost of a year’s in-state tuition, fees, and room and board for a public college in 2013-14. The cost more than doubles for private schools. The main costs you should budget for include:
Let’s take a look at the main tools available to pay for college:
Once you receive your college acceptances, it’s time to decipher your financial aid award letters. Your high school guidance counselor should be able to help you, and you can find many resources on the Internet. The college’s financial aid office can also answer your questions. As with any financial decision, you must understand every piece of a financial aid offer and how it compares with other offers you’ve received. You don’t want any big dollar surprises as you set out on your own.
Neither grants nor scholarships need to be paid back. Scholarships tend to be awarded based on merit, such as earning good grades, writing a great essay, or doing well in a particular activity. Colleges, private organizations, and even your parents’ employers may give scholarships. You can research many scholarships online. Just remember that legitimate scholarships do not require up-front fees. Your high school guidance counselor can help you find and apply for legitimate scholarships.
Grants tend to be awarded on the basis of financial need. Many college students receive Pell Grants from the federal government. Colleges give need-based aid as well, which allows some lower-income students to afford expensive private colleges.
The federal government offers college loans. If you have financial need, you’ll qualify for a subsidized loan—a loan that does not accumulate interest while you’re in school. Other federal loans include unsubsidized loans, which do accumulate interest during your studies. The federal government also offers loans to parents called PLUS loans.
Banks offer college loans, but be careful to read the fine print. These loans tend to have less favorable terms than government loans and often require a co-signer, such as your parent or guardian.
In addition, you can charge college expenses on a credit card. However, that isn’t a recommended way to pay for college.
Researching and applying for college is filled with daydreaming, excitement, and possibility. Where will you go? What will you major in? What will your career be? A question that isn’t always on that list but should be: How much can I afford to borrow?
It’s a tough question to answer because there are so many unknowns about where college will take you and what career you’ll ultimately have. But it’s critical to explore some scenarios so you don’t end up with crippling debt. College debt is nearly impossible to get rid of through bankruptcy. Debt forgiveness programs for federal loans don’t start until you’ve been paying the debt for a decade or more in most cases. One strategy is to check out debt repayment calculators online, such as http://mappingyourfuture.org/paying/debtwizard. Or listen to an expert’s opinion. “The total amount of student debt should not exceed the borrower’s anticipated annual salary for the first year out of school,” says Allesandra Lanza of the nonprofit organization American Student Assistance.
Kathy Ruby, a college finance consultant at getintocollege.com and a former financial aid director at St. Olaf College in Minnesota, has advice for would-be college students:
