CollegeRecruiter.com Insights by Admissions Counselors Blog

Joseph Schwingl has always loved crime shows—his favorites are CSI and Without a Trace. By the time he was a senior in high school, he had pretty much made up his mind that he wanted a career doing police work. “I like the idea of doing work where I’ll help my community,” says Schwingl, who currently volunteers with his local fire department.

He had heard that St. John’s University, which was near his hometown of Bellerose Terrace, New York, had a highly regarded program in criminal justice. He had the grades to get in, but there was one obstacle: the cost.

At about $29,000 for annual tuition, fees, and books, St. John’s seemed out of reach at first. Schwingl comes from a fairly average middle-class family with two younger brothers who also intend to go to college in the near future, so financial resources were limited. “I thought we were going to have a tough time paying for this,” says Schwingl, “but my parents encouraged me to apply for financial aid and see what happens.”

When he received his aid award notice in the mail, Schwingl says he was “relieved and surprised.” Based on his need, the school gave him a community recognition award of $2,000 and a financial grant of almost $9,000. Work-study provided an additional $5,000 and New York State chipped in $766. To make up the rest, Schwingl qualified for low-interest federal loans—the Perkins, the Stafford, and PLUS loan for parents.

Schwingl learned a lesson that each college-bound student should know: a college education almost always costs less than advertised, so don’t discount any school you really want to attend.

“Many prospective students do not even apply to more expensive schools simply because of the sticker price,” says Dan Lupin, director of financial aid at Embry-Riddle Aeronautical University in Prescott, Arizona. “Students should apply to the school of their choice and then let the school help them determine if attendance is financially feasible.”

Even if you don’t get a great aid package like Schwingl did, salary and employment statistics prove that investing in a college education makes good financial sense. Numbers from the U.S. Census Bureau show that the unemployment rate for four-year degree holders is approximately half that of those who hold a high school diploma alone. And the average annual income for college grads is $22,000 more than that for high school grads.

The idea of earning about $1 million more over your lifetime should give you some comfort, but you still have to pay the bills now. If you want to pay less for college, you’ll need to be aggressive and organized, both in your hunt for financial aid and in your efforts to cut costs.

Start with the fundamentals. Basically, there are two types of financial aid: merit-based aid and need-based aid.

Merit-based awards are typically scholarships given by a private institution, your college, or the government. These awards recognize your talents, whether they be academic, athletic, musical, writing, or something else.

Need-based aid is awarded according to your ability to pay for college. To figure out how much you should be able to pay, colleges look at your family’s income, assets, and other financial data that you provide on the Free Application for Federal Student Aid (FAFSA) and often on the College Board’s PROFILE form. (For more information, check out www.fafsa.ed.gov and http://profileonline.collegeboard.com.) Based on the financial data you provide, form processors calculate your Expected Family Contribution (EFC). Then colleges calculate your need using this formula:

Cost of attendance
–Your EFC
–Outside aid (scholarships)
=Need

Colleges will put together an aid package of loans, grants, and work-study that should meet that need.

Don’t rule yourself out. First of all, you have nothing to lose by filing the FAFSA—it’s free! And filing the PROFILE costs only a minimal amount. You just have to spend some time working closely with your parents to gather all the necessary financial data. “An open dialog between parents and students is really crucial,” says Mark Hatch, Vice President for Enrollment Management at Colorado College in Colorado Springs.

Second, a lot of students think they don’t have enough need to qualify. “About a third of our students don’t even apply for financial aid because they think they’re not eligible,” says Jay Leiendecker, Vice President for Enrollment Services at Dean College in Franklin, Massachusetts. “They think they’re too affluent.”

The fact is even a family with an annual income of $100,000 may still qualify for aid. Factors other than income are weighed when calculating need. For instance, an applicant may have other siblings in college, older parents, or the family may have had a recent financial setback.

File on time. The big date in financial aid is January 1 of the year prior to starting school. (January 1, 2007 is the earliest you can file your FAFSA for the 2007-2008 school year.) Students should have their form ready to submit on New Year’s Day: a lot of financial aid is awarded on a first-come, first-served basis, and the best awards are generally given to the earliest applicants.

What the aid package will look like In general, your financial aid will consist of three possible types of awards: scholarships and grants (money you don’t pay back), loans (money you must pay back), and work-study (money you earn).

1. Federal Aid. Federal programs supply about 66% of all financial aid to undergraduates in the form of:
   
   • Pell Grants. For students who show significant need. The maximum award is $4,050.
     
   • Supplemental Educational Opportunity Grants (SEOGs). For students with exceptional need. These awards range from $100-$4,000.
     
   • Work-Study. For undergraduates demonstrating financial need. These jobs pay at least minimum wage.
     
   • Perkins Loans. For students demonstrating need. These loans have a guaranteed low interest rate of 5% and provide undergraduates with up to $4,000 per year to a total of $20,000 over their undergraduate careers.
     
   • Stafford Loans. Available to all families regardless of need. These loans have interest rates that cannot top 8.25%. The Stafford offers up to $2,625 per year for dependent freshmen, $3,500 for sophomores, and $5,500 for juniors and seniors.
     
   • PLUS Loans (Parent Loans). Available regardless of need. PLUS can provide a loan amount not to exceed the total cost of college minus any aid you’ve already received.
     
   • Tax Credits. Depending on a family’s income, the Hope tax credit and the Lifetime Learning tax credit allow tax deductions of a maximum of $1,500 and $2,000 per year, respectively.
   
   
2. State Aid. About 7% of all aid comes from states that offer their own loans and grants. Most states use the FAFSA to determine aid awards, butcontact your state’s Department of Education to see exactly what you need to file and when.
   
3. College Aid. About 20% of aid comes directly from the institutions. Most college guidebooks list the percentage of students who receive aid and what the average aid amount is.
   
4. Private Scholarships. Only about 7% of aid comes from private scholarships, including employer-based programs. Yet this source gets a great deal of attention from the college-bound. To find out what private scholarships match your unique abilities, you may want to use one of the many free or inexpensive scholarship search engines available on the Web, such as www.careersandcolleges.com (click on “scholarship search”) and www.findtuition.com.

“Many students overlook scholarship sources that are right under their noses,” says Lupin of Embry-Riddle. “Relationships that family members have with community service organizations, churches, employers, previous military service, etc., can provide access to free-money programs.”

A word on loans Unfortunately, most financial aid is in the form of loans—money that pays for college now but has to be paid back with interest. The interest rates on these loans have been at record lows, but as of July 1, 2006, the rate on the Stafford jumped from 4.7% to 6.8% for borrowers who are starting school, and the in-school rate on the PLUS rose from 6.1% to 8.5%. (Keep in mind that these rates are variable and adjusted annually, so they can increase or decrease over time.) Also, with many student loans, you don’t have to begin repayment until six months after you graduate.

“Don’t be scared to take out loans,” says Hatch of Colorado College. “People have no problem with the idea of paying off a car loan in five years or a house mortgage in 30 years. So you really shouldn’t be afraid to pay off a college loan over a number of years. Besides, a college education will last you longer than a car or even a house.”

You certainly don’t want to take out more loan money than you can handle. To give you an idea of what your loan payments might be, the American Council on Education reports that the median undergraduate loan amount for students at private institutions in 2003-2004 totalled $17,125, with a monthly payment of $197.

When it’s time to start repayments, some students choose to consolidate their student loans and other debts into one low-interest loan. Consolidation can be a sensible option because you can lock in a low interest rate and take as long as 30 years to repay your loan. Even if you have only one loan, you can use consolidation to lock in the interest rate.

Lower your costs. If you’ve ever visited Microsoft’s corporate headquarters in Redmond, Washington, you may have seen posters with this slogan: “There’s always a way to save money. Look for it. Look for it. Look for it.” That should be your mantra for cutting costs at college. You can save by buying used textbooks; using your student ID for discounts; e-mailing instead of calling long distance; using your paid-for meal plan instead of eating out.

Financial aid administrators stress that you should always try to get into the college that you think suits you best. So get going—focus your energy on finding financial aid, and you too will be able to afford the school of your dreams!

Article by Don Rauf and courtesy of www.careersandcolleges.com