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Questions
and Answers for students and parents concerning New Questions added on 03/11/2007
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Q.
What is a
student loan and where do I get one? A.
A simple question; I'll try to give you a simple answer. First,
almost two-thirds of all college students get loans to help pay for
college. Almost all students who receive financial aid end up with
loans. If you are hoping to receive financial aid and hoping to graduate
without debt from loans, you are likely to be disappointed. Sorry, the
average student leaves college with roughly $20,000 in debt from federal
student aid loans. Then again, that same "average" student is
likely to earn an additional $19,000 each year because he or she
graduated from a four-year college. That's good math! You
can get a loan to help pay for college from many places, including your
bank, but most loans for college come through three federal programs,
because they almost always offer the best rates and repayment plans.
These loans are called Stafford Loans, PLUS Loans, and Perkins Loans.
Interest rates on the Stafford Loans are commonly 5.3% this year and are
expected to go up another 1.5% – 2.0% for next year. Those are still
good rates, but not as good as they have been over the past few years. A
PLUS Loan is generally at 6.1%. To
qualify for a You
need to know the least about the Perkins Loan. Once you have filled out
and sent in a FAFSA form, the colleges you are applying to will tell you
whether or not you are eligible for a Perkins Loan. This determination
is based on your family finances, a.k.a. "need." You
do need to know about the Stafford Loan, which is the big player and is
a bit more complicated. It is a loan in the student's name. Once you
submit your FAFSA form, the college (actually the federal government)
will determine if you are eligible for a Stafford Loan. Some colleges
will provide you with the loan directly. Some colleges will just tell
you that you are eligible to go to a bank of your choice to get your
Stafford Loan that they have “approved”. Some colleges will tell you
to go get your loan from a bank, but you must choose from their list of
“preferred lenders”. Stafford Loans are generally based on need.
That means that if your family income and assets are too high, you
won’t be eligible for a “subsidized” Stafford Loan. With a
“subsidized” Stafford Loan you make no payments until six months
after you finish college. But, if you don’t qualify for a
“subsidized” Stafford Loan, you may well be eligible for an
“unsubsidized” Stafford Loan, which is not based on financial need
and for which Bill Gates would be eligible. There
is a limit to the amount you can borrow on a Stafford Loan -- $2625 for
your first year in college, $3500 for your second year, and $5500 for
each of the final two years. Those amounts usually don't cover all
expenses. Now comes the PLUS loan. It is a parent loan. It is
designed to cover all other college costs. It is not based on need, but
it is based on credit-worthiness. So you can’t be sure you can always
get all you need. The process of getting a PLUS Loan is somewhat similar
to the Stafford Loan. In most cases, you will be talking to your banker
about this PLUS Loan, which is backed by the federal government. If
you still come up short, you should ask about “alternative” loans.
These are loans for college that are outside of the federal
government’s programs. Your college and your high school will help you
identify good options. Larger US banks do much of this business. When
you receive your college acceptance letter you will also receive your
financial aid award letter. It is very likely that you will have a
Stafford Loan included in your award. It is a very good idea to
understand Stafford Loans before you receive this letter, and know where
you might get yours, because you usually have just a few weeks before
you need to decide which college you want to commit to. www.finaid.org
is a very good resource for information on
financial aid and loans, as is www.salliemae.com. Q.
When do we apply for financial aid? A.
Believe it or not, some college
financial aid deadlines have already passed. Most haven't. Check the
college's web site to find out what their financial aid deadlines are.
Most deadlines are between February and August. Q.
If we
missed the deadline, should we still apply? A.
Yes, absolutely. You can receive
financial aid through the college from the federal government until July
after the school year you want aid for. If you miss the college's
deadline, you may miss out on money the college awards from its own
coffers. Q.
How do I file for
financial aid? A.
Complete the FAFSA. You may also
need to complete the CSS Profile form. See what forms the college
requires. Q.
Does the
parent fill out the FAFSA or the student? A.
If the student is a typical,
18-year-old, high school senior, the answer is very likely to be the
parent, even though the "You" on the FAFSA is for the student.
If your child understands your finances and is able to complete your
taxes, you have a gifted child and I would be happy to recommend some
colleges with strong business and accounting programs! Q.
How hard are these
forms to fill out? A.
They are easier than doing your
taxes, usually much easier. If your taxes are hard, the FAFSA is likely
to be somewhat hard. If you own your own business or are divorced (or
both!), filling out the FAFSA is likely to be a bit harder than
otherwise. They say you should be able to complete the FAFSA in about an
hour. It took me an hour and a half. Q.
Do
I need to have completed my taxes before I fill out the FAFSA? A.
No, but it sure does make it
easier. On the other hand, if you can get your taxes completed by
January 15, you are way ahead of me. Q.
Should I
complete the FAFSA online or on paper? A.
If you have a computer and
Internet access, I suggest doing it online because it is easier.
Completing the FAFSA online at www.fafsa.ed.gov
gives you access to some pretty good instructions and advice, and
you will get an estimate of how much the federal government thinks you
should be able to spend on college almost immediately . . . you get the
estimate almost immediately, you get to spend the money a little later!
That's a good number for you to have as soon as possible. The federal
government has made the paper version of the FAFSA harder to come by
this year. Your guidance counselor has a very few copies. Just keeping
the federal budget under control! Q.
How can I get help
filling out the FAFSA? A.
Your best sources for help are the
FAFSA web site, the college financial aid office, your guidance
counselor, and you may want to attend a College Goal Sunday workshop on
January 29. More information is at www.collegegoalsundaymaine.com.
If you really get stuck on what to put on a certain line, call the
college. Q.
I
was told I need a PIN to complete the FAFSA. How do I get that? A.
You do that at www.fafsa.ed.gov.
It is easiest to get a PIN for the student and a PIN for the parent.
This usually takes ten minutes to do, and two days before you get your
PIN by e-mail. Q.
I just received my financial aid award and there is no way we can pay
for the college. What do I do
now? A.
The job of a college financial aid director is to provide just enough
funding so that as many great students will enroll at their college as
possible, and to do it all spending as little of the college's money as
possible. Actually,
some colleges have very little of their own money to spend on
scholarships, so their primary responsibility is to help students and
prospective students get as much federal and state financial aid as the
students are eligible for. Applying for that financial aid tends to be a
mostly "formatted" process – you provide the numbers on the
FAFSA form, and a federal computer tells you how much federal financial
aid you can receive. But,
for more expensive colleges, including the most expensive colleges,
financial aid directors are responsible for deciding who gets how much
of the college's own scholarship funds. This is often the largest part
of the financial aid award, by far. Again, the financial aid director's
job is to spend as little money as possible to get the "best"
group of students. So, their strategy is usually to try to determine how
little financial aid they can offer and still enroll the student. While
I may sound like I am giving all this a negative spin, I really am not.
Financial aid directors are also very concerned about fairness – about
not giving financial aid to one family that doesn't really need it, at
the expense of some other family that really does need it. Yes, there
are plenty stories of where colleges give large, and less-needed awards,
to students for the self-interest of the college. Sports scholarships
are one example. Let's
assume that the college you applied to is interested in fairness. They
probably gave you a financial aid award that would enable you to pay for
the college education, but with a lot of sweat. Most often, families can
pay for the college education, but it won't be easy, and it looks almost
impossible from where you stand today. So,
the financial aid director thinks you can afford the college education,
and you are convinced that you can't. One of you must be wrong. Rather
than scurrying around in search of every unheard of scholarship for
left-handed caddies, you really need to sit down with the college's
financial aid director and very calmly and politely explain why you
believe that it is not that you don't want to pay that much, but
that you can't pay that much without giving up eating. You could
have made a mistake entering your financial information. He or she could
have made a mistake doing the calculations or just couldn't see it from
your perspective. The college is interested in enrolling you, so you are
both interested in making this work. You will probably talk about loans,
payment plans, jobs on campus, and, hopefully, more grants from the
college. College
food is much better than it was 20 years ago. Few colleges expect their
students to feast while parents eat oatmeal. Before
you go out and stock up on oatmeal, talk to the college's financial aid
director, parent and/or student, in person or by phone. Be open, honest,
and ready to show your financial details. If you have chosen your
college well and you are eager to learn a lot, your college education
will be a great investment, oatmeal or no oatmeal. Q.
How do I apply for financial aid and
when do I need to do this? A.
You apply for financial aid by filing a FAFSA form. Some colleges,
especially private colleges, that traditionally hand out a lot of their
own scholarship money, not just federal funds, may also ask that you
fill out the CSS Profile. And, some colleges ask for even more
information than they can get from the FAFSA form or the Profile form.
Some students applying to more expensive colleges may end up completing
three financial aid forms, but most students file only one form – the
FAFSA. Well, their parents do anyway! So,
you apply for financial aid by filling out the FAFSA form, and maybe the
CSS Profile form, and maybe an additional institutional form. The FAFSA
is a federal form that looks and feels like a tax form. You won’t
receive need-based financial aid without completing this form. You will
find it in your high school guidance office. You will find it at the
colleges you visit. You will find it in many libraries. I encourage you
to find a print copy of the FAFSA today so you can become familiar with
it. Then, more and more families are going to www.fafsa.ed.gov to
complete the FAFSA online. If you have a computer and Internet access at
home, I encourage you to go that route. The web site does provide
helpful support information. If you don’t have Internet access, no
problem; you can complete the FAFSA by hand and put it in the mail. For
the CSS Profile, go to www.collegeboard.com. When
do you need to do all this? For a small number of students, the first
step is to fill out the CSS Profile form in late fall of senior year in
high school if the student is applying Early Decision. For most students
though, the first step is to get a PIN number at www.fafsa.ed.gov, which
is sort of a password to let you go online to complete your FAFSA online
in the days ahead. You should try to get your PIN in December of senior
year. If
you are applying to a college with an early application deadline, you
will need to complete your FAFSA form in January or February of the
senior year in high school. You can't fill out the FAFSA form before
January 1. Check the college's financial aid application deadlines.
Missing these deadlines decreases your chances of getting the financial
aid you need. In truth, most colleges award financial aid throughout the
winter, spring, and summer. They may have a “priority date” by which
families should apply for aid to maximize their chances of receiving the
financial aid they need, but financial aid packages are often still
being put together into the summer. The
earlier you apply, the better. One challenge, though, is that financial
aid forms ask you to provide information from your 1040 tax returns. Not
many families have done their tax returns in January. Fortunately, you
have the option of checking a box that says that the numbers you are
providing from your returns are only estimates. That’s right, you are
supposed to estimate some numbers for your not-yet-completed tax return.
It is not a pretty process, but it works. The colleges will ask you to
send in your tax return when it is done, and they may adjust your
financial aid award, up or down, if your estimates were off. If you think you will have a hard time paying for your child's college education, I encourage you to apply for financial aid. Applying takes some time and effort, but usually less than you think. A.
Most student loans for college are Stafford Loans. The Stafford Loan
program is the big player in federal student loans. It is popular to
complain about the burden of student loans these days, but there are
actually some very good deals. Despite what you may hear, the whole
federal student loan program is set up to help make college much more
accessible for families. Unfortunately, the amount of loans offered,
relative to the amount of grants, has increased significantly over the
past twenty years. So if you are headed toward college, be prepared for
loans. There
are Subsidized Stafford Loans and Unsubsidized Stafford Loans. To
qualify for a Subsidized Stafford Loan you need to show financial need.
You do this by completing the famous FAFSA form. You don’t need
to show financial need for the Unsubsidized Stafford Loan, but you still
need to complete the FAFSA. The
first answer to your question of when to begin paying back your loan is
six months after graduation. That six months, plus the time you are in
college, is called the “grace period.” With Subsidized Stafford
Loans, the federal government covers your interest payments during this
grace period. You make no payments. With Unsubsidized Stafford Loans,
the federal government doesn’t cover your interest payments. You can
make these small, interest-only payments during the grace period or you
can “capitalize” these payments, meaning you add them to your
monthly payments after the grace period ends. Your
payments can be deferred while you are in graduate school. Sometimes
payments can be deferred because of economic hardship, but that is not
anything to count on! Loan payments may be deferred or even cancelled
with service as a teacher or nurse in areas where there are shortages.
There are other programs that may help you pay back your student loans,
including the military. So,
how long do you have to pay them back? Ten years is common. Up to thirty
years is possible. The “Standard Repayment Plan” allows you to pay
back your student loans in ten years or less. An “Extended Repayment
Plan” allows you to make repayment over twelve to thirty years. There
is a plan that starts the young college grad with small payments that
gradually increase as the student reaps the financial fruits of his or
her college education. There is even a plan that matches your payments
with your income. As your income goes up or down, your payments do the
same. The
first step toward finding a Stafford Loan is your college. Some colleges
will ask you to borrow directly from the federal government. Some
colleges are set up to have you borrow from a local bank or other
private source. Sometimes the college has “preferred lenders” that
the college wants you to use. Other times, you can get your loan
wherever you choose. It is worth shopping around when you have that
option. You’ll find different programs with different rates. A
good college education has great value. If you have your sights on a
great college education and you need a loan, both will be very smart
investments. Q.
Which college will offer me the most financial
aid? A.
I wish I had an easy answer for you. I will try, but you will see why
there is no simple answer. Some
colleges say they offer financial aid only to students who show a
financial need. That is mostly true, but if they really need a
bassoonist or a hockey goalie, they may decide that you have a little
more financial need than you might have thought, and their
"need-based" financial aid offer becomes extra generous. Some
colleges publicly offer merit scholarships – that is financial aid for
students that may not show a financial need, but do have particular
talents that the college wants. Though sports scholarships get the most
attention, most merit scholarships go to students who have done well in
their academic work at school. So you may get the most financial aid
from a college that offers merit scholarships, if you have very good
grades or a special talent that interests them. Some
colleges offering need-based financial aid will meet 100% of need.
Exactly what your "financial need" is is not always a solid
number, but if a college meets "100% of need," that is a good
sign. Ask the college, "What percent of need do you meet?" Very
expensive colleges often, though not always, offer large financial aid
packages, so don't exclude expensive colleges from your list before you
know how much financial aid they will offer you. One $42,000-a-year
private college offers an average financial aid package of $29,000. That
just brought the average cost of the school down to $13,000 for those
who need financial aid . . . sort of. So, the answer to your question
may be that the college that will offer you the most financial aid will
be a very expensive college, but these also tend to be very selective
schools as well, so good grades will be essential. But,
the $13,000 number above isn't quite accurate. $13,000 probably won't be
your true cost. Some of this financial aid will actually be grants –
money that you don't have to repay. Some of it will be loans, which you
do have to repay. Loans increase your cost above $13,000. You just pay
it in later years. You need to know and compare the ratio of grants to
loans at the colleges you are considering. Some colleges will have an
average financial aid package that will be 40% grants and 60% loans.
Other colleges will offer almost 90% grants and 10% loans. That makes a
big difference. Also,
in the mix is "College Work Study." That is a job on campus
that they arrange for you, so it isn't free money. It is money you earn,
and it is included in the average financial aid package. So,
to determine the college that will be the best financial deal for you,
be sure to ask about the average financial aid award. Be sure to ask if
they offer merit aid. Ask what percentage of need they meet. They will
know what you are asking, and the good colleges will give you a straight
answer, which includes one number and limited fine print. Ask about the
percentage of financial aid that is loans and College Work Study, and
the percentage that is grants. Ask about the average graduating student
debt (from student loans). They know that number, and hopefully they
will share it with you. You
wanted some answers. Here are just a few colleges they typically offer
generous financial aid packages: Princeton University, NJ; Colgate
University, NY; Amherst College, MA; Wesleyan University, CT; Colby
College, ME; Swarthmore College, PA; Hamilton College, NY; California
Institute of Technology, CA; Bryn Mawr College, PA; Barnard College, NY;
Dartmouth College, NH; Mount Holyoke College, MA; Bowdoin College, ME;
Brown University, RI; DePauw University, IN; Lafayette College, PA;
Haverford College, PA; Cornell College, IA; Pomona College, CA; Reed
College, OR; Middlebury College, VT; Smith College, MA; Wellesley
College, MA; Bucknell University, PA; Trinity College, CT; Oberlin
College, OH; Bates College, ME; Harvard University, MA; Connecticut
College, CT; Emory University, GA; St. John’s College, NM; Occidental
College, CA; University of Notre Dame, IN; Grinnell College, IA; Scripps
College, CA; Columbia University, NY; George Washington University, DC;
Union College, NY; Boston College, MA; Williams College, MA;
Northwestern University, IL; and Colorado College, CO. Colorado College,
while often offering slightly smaller grants, costs $6,000 less than
other colleges on this list. Many
of the colleges listed above as offering generous financial aid packages
are very selective schools. Some popular and generous colleges with
somewhat less selective admissions policies include: Beloit College, WI;
Denison University, OH; University of Denver, CO; Lake Forest College,
IL; Goucher College, MD; Guilford College, NC; University of Redlands,
CA; Occidental College, CA; Alfred University, NY; Susquehanna
University, PA; Whittier College, CA; and College of Wooster, OH. Q.
How will saving in a 529 program affect my
financial aid award? A.
Currently, colleges are quite friendly to 529 plans, like NextGen in Despite
what you may have heard, the American college financial aid process is
driven primarily by fairness. Now, you be the judge. The Smiths have
$100,000 saved in a 529 plan for their daughter's college education.
Because it is a 529, it must be spent on their daughter's college
education, or perhaps transferred to another family member. Do you think
colleges should ask them to contribute just 5% of the $100,000 toward
their daughter's education and leave the rest there to go unused by
their daughter? In
the near future, I expect 529 savings to have a very negative impact on
financial aid awards. If you have $100,000 in a taxable investment, you
can expect to contribute perhaps $5,650 of that toward college costs
each year. That means $5,650 less in financial aid you may receive. In
the next few years, I would expect to contribute $25,000 each year for
four years from a $100,000 529 savings plan. So,
should anyone save for college in a 529 plan? If you don't expect to be
eligible for any need-based financial aid, they are a great,
tax-advantaged way to save for college. If estate planning is your
primary concern, they can be a great way to lower the value of your
estate. If you expect your child to apply to a less expensive college,
the tax benefits of a 529 may outweigh its negative impact on a smaller
amount of potential financial aid. If
you have a lower income and high hopes for being eligible for a larger
financial aid package, I suggest you do some very careful math before
you invest in a 529 plan. A.
This isn’t a fun position to be
in, but you are not alone by any means. And, the bottom line is, you can
make it work. You can! The
first step is certainly to go back to the financial aid office and tell
them you are having trouble figuring out how you can afford the year’s
college bills, and you need help. Then be quiet for a while. Ask about
PLUS Loans (parent loans for college) that were designed to cover all
your remaining college costs after Stafford Loans (student loans) and
other financial aid. PLUS Loans don’t always work as neatly as they
sound because the amount of the loan depends on creditworthiness and the
amount the lender thinks you can safely borrow. Next,
you need to look into “alternative” loans. These are loans for
education to fill the college gap you and many others are trying to
fill. You should check with MES at www.mesfoundation.com
and ask about their alternative loan. Check with SallieMae at www.salliemae.com
, TERI at www.teri.org; also Key Bank,
Bank of America, Chase, Citibank, Wells Fargo, and other large banks. Before
you go searching for these alternative loans you should check in with
your own local bank to see if they can help. They may be very helpful.
Also, some families are using home equity loans to pay for college.
Other families tap into their 401K accounts. Just make sure you get some
trusted guidance before you do any of this. You
should also look into “payment plans.” They are a low-cost way to
spread your college bills out in small(er) monthly payments. Your
college should be able to tell you all about these. AMS www.tuitionpay.com
and Tuition Management Systems www.afford.com/
are the big players here. The
financial aid process makes everyone squeeze at least a bit. Most
parents have to adjust their lifestyle some. But remember, a four-year
college education is often worth approximately $20,000 in additional
income each year throughout the student's career. Finding a really great
college experience makes your investment worth even more. Your best help
is likely to come from your college's financial aid office, but you need
to ask for it. Q,
Will applying for financial aid hurt my chances of being accepted to a
college? A.
Unlikely. Yes,
it does happen some, but it is rare. And, you will rarely know that it
happened to you. If you think you will have a hard time paying college
costs, you should ask for financial aid. Almost always, you do that by
filing a FAFSA form. Most
colleges will accept the students they want, and then they will figure
out how much financial aid they must offer to meet the financial needs
of these applicants and to convince the applicants to enroll. Sometimes,
a college, often those with rolling admissions, will need to think about
the financial need of a student when they are accepting their final
students and when their financial aid budget is just above the empty
line. In these cases, a college may conclude that it would be wasting
its time to offer an acceptance, and very little or no financial aid, to
a student with great financial need. It also isn't particularly good
public relations! That doesn't mean that the student wouldn't get a Pell
Grant or a Stafford Loan or some other federal or state grant or loan,
it just means that the student wouldn't get scholarship money from the
college's own financial aid coffers. Again,
the odds of this happening are slim. The odds are in your favor to ask
for financial aid if you need it. Colleges will rarely tell you that
they won't accept you because they don't have the financial aid for you.
The "gold standard" of college admissions is to make
"need-blind" admissions decisions; that means they accept
students regardless of their ability to pay. If,
through some conversations you have with a college admissions office,
you think that the college might be about to send your child a rejection
letter because they can't offer the financial aid you need, you might
consider calling the admissions office and saying that you will try to
get through the first year without financial aid if they could offer
your child admission to their college. That shows the college that you
are very interested in their college, and if your child is otherwise a
good candidate for admission, it can be a tough offer for them to
refuse. Q.
Is it true that Division I colleges offer
sports scholarships and Division III colleges don't? A.
Yes . . . sort of. Division
I colleges and universities offer sports scholarships for students to
play a sport at their school. Quit the team or don't perform well and
you lose that scholarship. Division III colleges can offer
extra-generous "merit" scholarships or even
"academic" scholarships to that student who just happens to be
a really good athlete. Sometimes these agreements are subtle; sometimes
they are not. Sometimes, you will only get this "academic" or
"leadership" scholarship as long as you are playing on their
varsity sports team. That's not very subtle! You get the picture. If you
are talking to a Division III coach, don't mention "sports
scholarships." Division III schools don't do them! So,
the answer to your question is, "Technically, yes, but . . ." Q.
If college is so important, why isn't it free? How come college is so
expensive? A. Two
good questions! I'll try to answer them both. Fifty years ago, going to
college was something very special. Most people never even considered
it. College was primarily for the very bright and/or the wealthy. Today,
college is still very special, but this country is slowly coming around
to the recognition that education beyond high school is where the future
is. College is how we
will compete in the global marketplace where other countries can produce
goods less expensively than we can. College is where we can learn to
understand other cultures. College is where we can learn to balance
smart economic growth and a healthy environment. Talent and knowledge
are where the future is for our country. Our country is talking about
making college more affordable and there are record amounts of financial
aid available from the federal government, but we have a long way to go.
I hope you keep asking this question because it is the right question to
ask. So, why isn't
college free? Well, it is for some. If you earn very good grades in high
school, there is a good chance you can attend college for free. If you
attend a service academy like West Point or Annapolis or the Coast Guard
or Air Force Academies, college is free (sort of). If you are accepted
to Harvard and your family earns less than $40,000 per year, college is
free. If you are number one in your class, college can be free. If you
attend a community college and you are eligible for several tax credits,
college can be free or close to it. In any case, an education at a
community college is a great deal, even if it is not quite free. There
are scholarship programs throughout the country offered by individuals,
usually, who agree with you that college should be free, at least for
some. Whether college is free or not, if you are focused in college,
every penny you invest in college will be well worth it . . . and then
some. On to your second
question. Why is college so expensive? I am sorry to say college is
expensive because the noisiest part of the market likes expensive
colleges. Ever wonder why the most selective colleges make up most of
the most expensive colleges? Ever wonder why the most expensive state
universities are the ones that are in greatest demand by out-of-state
students? Many colleges keep their costs high because a large part of
the market perceives that high costs means a high quality education for
them. The college that is recognized as the most expensive college each
year gets some great free marketing that the second most expensive
college doesn't get. When colleges
raise their rates more federal financial aid comes their way. This means
that those who actually can pay $42,000 a year pay more each year, and
those who can't afford $42,000 per year get more financial aid each
year. It π s not quite that clean, but close. And, that is not all
bad. The next reason
for high college costs I like even less. Despite my better efforts, many
families continue to judge colleges by looks. ≥Oh, I just loved In defense of the
colleges, today they are offering a lot more student services, both
academic and nonacademic, than they used to. And, they do spend more
time and money trying to reach a broader market of students. In truth though,
recent research shows that college is no more expensive today than it
was twenty years ago after you figure in inflation and increased
financial aid. Twenty-five years ago, we were howling about college
being too expensive . . . just like we do today. Don't stop asking
this question! Q.
We hear a lot about private scholarships for college and that a lot
never get awarded. How do we find them? A.
Most of the more than $120,000,000,000 in financial aid money
comes from the federal government and from the colleges; private
scholarships are a very small part, but seem to get a lot of attention.
Yes, some of these scholarships don't get awarded each year, but usually
they are very specific scholarships for students with a particular
talent applying to a particular college. It is quite likely that you
just aren't eligible, unless you are willing to change your college
plans so that you can win a $500 college scholarship. I'd recommend
against that! What
most parents are looking for is that big list of scholarships – the
ones for left-handed students, violinists, and golf-caddies. Yes, this
list exists. Yes, the list is long. Yes, some have very specific and odd
criteria for awarding their scholarships. You’ll find many of the
scholarships listed in big books in the bookstore or in your local
library. The Scholarship Book by Daniel Cassidy is as good as
any. Better than those books may be several websites. I would visit fastweb.com,
collegeboard.com, fastaid.com,
collegeanswer.com, and finaid.org.
There are plenty of other websites serving the same purpose, but these
are some of the leaders in this business. If
you are looking for private scholarships that you have a reasonable
chance of winning, I would start with your guidance office. In most
cases, they have more scholarship information than you realize. That is
because local organizations, which sometimes have a hard time finding a
recipient for their scholarship, usually make the high school guidance
office their first stop. Next,
you should check with the state. In So,
do students actually win these national scholarships? Yes, students do
win, but I sure don't meet many. So how do you make yourself one of
these winners? Read one of these books or go to a website, identify some
sensible scholarships, and plan on applying to a large number of
scholarships with the hope that one or a few will come through. If you
apply to enough scholarships, you may well win. Is it worth the time and
effort? That's a tough call. If you are a high school senior and it is
October, you've got all your college essays written, applications done,
SATs prepared for, your homework is done, and you have time on your
hands, I'd get right at those private scholarships. But, I don't meet
many of those students either. The
next question you should ask is about the impact of outside scholarships
on the financial aid award you receive from the college. If you win an
outside scholarship, will you just lose financial aid from the federal
government and the college, so you won’t really have gained anything?
The answer is often yes, but it is a bit more complicated than that. If
you are not eligible for need-based or merit-based financial aid from
the college or the federal government, then these outside scholarships
are obviously all in the plus column. If you receive merit-based aid,
then these outside scholarships are less likely to have a strong
negative impact on your financial aid from the college. If you have
received need-based aid from the college, several things can happen. The
worse case scenario is that the college, once it learns about your $500
scholarship from the local Rotary Club, will subtract $500 from the
amount of grant money it offers you. Better than that, it may subtract
$500 in loans that it offers you. In this case, you gain a $500 grant
and don’t have to pay back $500 in loans. That’s good! In
some cases, colleges may just treat your $500 from the Rotary Club as a
student asset or income, perhaps this year or perhaps for next year.
This means they would expect you to contribute roughly 35% or 50% of the
$500 toward college costs each year, and they would decrease your
financial aid award by that much. So, you end up ahead of the game, but
not by much! My advice? Investigate outside scholarships, but a student’s time is probably better spent on homework and college essays and, perhaps SAT preparation, and other fun things like that. Q.
Isn’t it true that the more we save for college, the less we are
likely to receive in financial aid? If so, why should we save at all? A.
That is true. If
you are applying for, and hoping to receive, need-based financial aid
– that is financial aid awarded to you when you show financial need
– then the more money you have, the less you need to receive in
financial aid. If you have no financial need, then it won't matter how
much you save. And, if you are applying for, and hoping to receive,
merit-based financial aid, such as academic scholarships or music
scholarships or community service scholarships or athletic scholarships,
the amount of these awards usually won't be affected by the amount of
money you have saved. But generally, saving more for college means you
will receive less in need-based financial aid from the federal
government, the state, and the college. Now
let me try to convince you that you should save for college. And,
hopefully, I can convince you that the amount you need to save is much
less than you may think. Colleges
will often ask you to contribute up to 6% of what you, the parent, have
saved, and perhaps 35% of what the student has saved. With a lower
income, colleges may even expect you to contribute none of what you have
saved. So, saving $10,000 for college may only subtract $600 from your
financial aid award – perhaps 60% of which is likely to be loans. A
little more math tells you that that might calculate to $240 you
wouldn't get in grant money that you don't have to repay, and $360 in
loans. Then
there is this thing called "gap." Colleges often don't or
can't offer you all the financial aid that the federal government and
the college think you need. 30% is not an uncommon "gap." That
means that if the full cost of college is $20,000 for that year and the
federal government thinks you should be able to come up with $10,000
toward college costs, then the college might offer you $7,000 (not
$10,000) in grants (40%) and loans (60%). The missing $3,000, the
"gap," is your problem. In
addition to this, the "full cost of college" that you read in
the catalogue is rarely the real "full cost of college." You
might expect another $1,000 annually in travel, food, clothing, and
other costs of college life. Everyone
complains about paying for college. That's because the financial aid
system is designed to do just that – make college education accessible
for all, but with more than a little sweat for all. Almost everyone,
regardless of income, has to sweat at least a little to pay for college. While
these are all hypotheticals and averages, they are useful numbers to
consider. If you have $10,000 saved for college, you may lose $240 in
grant money and $360 in low interest loans, and you will have $9,400
available to help with college costs. Additional college costs after
this $9,400 is gone must get covered by personal, alternative, or home
equity loans (they cost you money), or by sweat. It
is a very good idea to have some savings set aside for college. The
important point is that you do not need to aim to save the full cost of
college, but do try to prepare yourself for the potential
"gap" and the "incidental" costs of college. The latest numbers say that a college degree results in roughly $938,000 in additional income over a lifetime. Whether college costs you $2,000 a year or $45,000 a year, I say it is worth it. And, saving ahead for college just makes paying for college easier . . . and cheaper. Q.
A college education seems to be more expensive than our family could
ever afford. How much does college cost? In
fact, you can invest as much or as little as you would like in a college
education. You can invest $46,000 a year for four years at a very
expensive private college in the Read
any newspaper or magazine and you will read about the high costs of a
college education and overwhelming student debt. You will read about the
high costs of the most expensive colleges in the There
are many reasons why families spend so much on college education, but I
am convinced that the biggest reason is lack of information and
planning. Wait until senior year in high school to explore your college
options and you are very likely to spend much more on a college
education than you need to. So,
it is an investment, not a cost. You can invest a lot in Apple stock, or
you can invest a little. You can invest a lot in education, or you can
invest a little. You don't have to invest at all! The great deal with an
investment in education is that you get to control the return on your
investment. Invest in the latest high-tech company and some CEO you have
never met, or 100 stockbrokers you will never meet, or just a lot of
senseless emotion, will determine how much you make on your investment.
With an investment in education, you or your child gets to decide how
much you gain in return for your investment. National
statistics say that investing in a four-year college education will help
you earn an additional $19,000 each year over a lifetime when compared
to just finishing high school. That means that even if you invested the
most you could invest, perhaps $184,000, in a college education, your
return would be $931,000. Better than that would be investing much less
than that, perhaps $2000 a year, for the same $931,000 return. Plenty of
families do it; you can too. And, then there is the part of the return
that doesn't get measured with a dollar sign. The
trick is to get information and plan ahead. Access to good information
is something we, and many others, are working on. Planning ahead is up
to you. If you can set money aside every month to save for college,
that's great. Many of us can't. There are two kinds of planning for
college – financial planning and college planning. If you can't do the
first one, do the second one. How
much you invest in a college education is not really what matters. Where
you invest your money really does. The amount you invest in a college
education is up to you. Where you send your investment is up to you too. Q.
What
is a Hope Scholarship and how do I get one? A.
There
are several programs called Hope Scholarships, but the one you are
probably asking about isn't really a scholarship at all; it is a tax
credit. You will see it referred to as the Hope Credit more often these
days. The
Hope Scholarship (or Credit) is a tax credit worth up to $1,650 for each
child who is a freshman or sophomore in college. That means that if you
qualify for the tax credit and you are just about to write the IRS a
check for $5,000, for example, you would now write the IRS a check for
$3,350. That means you get to keep $1,650. Tax deductions are
good. Tax credits are great. Now
that I have tried to simplify the explanation, here is some of the fine
print. Do you qualify? The student needs to be at least half-time for at
least one term at an accredited higher education institution; that
includes most all colleges and universities you might attend. The
student needs to be in his or her first or second year in college, and
you (the parent) or the student can only claim this credit twice. When
you think about it, a college student is a freshman and sophomore during
parts of three calendar years. Sorry, you can only claim it twice. What
is significant here is that if you are attending a local community
college, for example, and where your costs are close to $2,200 per year,
you may want to watch the timing of your payments so you can make the
most of this credit. Provided
your income, your MAGI, is less than $55,000 for a single tax filer, or
$110,000 for a married couple filing jointly, your credit can be equal
to 100% of the first $1,100 and 50% of the second $1,100 of qualified
educational expenses. They are generally required fees, such as tuition
and other academic fees. You cannot include the costs for housing
(room), food (board), insurance, travel, textbooks, pizza, iTunes
downloads, energy drinks, and other college essentials. Though they may
be essential, they are not required! You
can include the qualified expenses whether you pay for them by cash,
check, credit card, or loan, even if you will repay the loan later. You
generally cannot include costs that were covered by scholarships you
received. To
get the tax credit, you need to fill out a Form 8863. As IRS forms go,
this isn't a bad one. One page of numbers to enter and three pages of
instructions. Not bad! You
also need to know about the Lifetime Learning Credit, which is a tax
credit for 20% of the first $10,000 in college expenses. The Lifetime
Learning Credit is 20% of $10,000 per family; the Hope Credit is per
student. It is possible that you will be better off claiming the
Lifetime Learning Credit rather than the Hope Credit if you have only
one child in college and his/her qualified expenses exceed $8,250.
Sorry, you can't get Why do I like these credits so much? Because to all those people who say a college education is really expensive, I point out that someone could get a great education at a community college with fees of $2,200, perhaps, and the student might only pay $550 (twice) after the tax credit. Since the average person with an associate's degree earns $8,000 more each year than someone who doesn't go to college, whether or not you'll get your $1,100's worth is a question I can answer without a calculator! Q.
When do we apply for financial aid? A.
You can file a FAFSA form to apply for federal, state, and
college-based financial aid after January 1, not before. The rest of the
story is that many colleges have financial aid deadlines. The earliest
of these deadlines are often early February. So you don't have a lot of
time. You
need to apply for a PIN number first, if you plan to apply online at
www.fafsa.ed.gov, which is recommended. You will receive your PIN number
a day or two after you apply. Having completed your taxes will make
filling your FAFSA much easier, but few have their taxes filed by
February. Those
colleges with the earliest deadlines are usually more expensive colleges
offering more financial aid from their own coffers. You are strongly
encouraged to know what their deadlines are and meet those deadlines. If
you have any questions, don't hesitate to call the financial aid office
at the colleges to which you are applying. In fact, some federal financial aid is available at any point that you apply for it. Pell Grants, Stafford Loans, and PLUS Loans, for example, are available for qualified students throughout the year. With other federal financial aid programs, the federal government gives colleges a certain amount of aid to distribute as best they can. Those colleges will begin that distribution shortly after their financial aid deadlines. Q.
How do they treat divorced parents in the financial aid process? A.
Determining financial aid awards for students with divorced parents can
be a challenging and contentious part of the financial aid process. When
filling out the FAFSA form, which is the gateway to financial aid, if
parents are divorced, you’ll need to provide financial information
about the parent the student lived with most. If the student lived with
each parent the same amount, you will need to provide information about
the parent who provided the student with the most financial support. If
the parent listed on the FAFSA has remarried, then you will need to
provide financial information from that parent and the person he or she
married, the new stepparent. If there is a prenuptial agreement stating
that the stepparent will not provide financial support for the child, it
will probably not impress the colleges, in most cases. A few colleges
may consider this in special cases, but the federal government will not.
If
applying to a more expensive private college, the student will probably
be filling out a CSS Profile, in addition to the FAFSA. In this case,
the colleges will seek financial information from the parent the student
is living with most, plus that parent's new spouse, plus the student's
other biological parent, plus his or her new spouse. That may sound like bad news, but you are always smart to sit down with the college’s financial aid director to explain all the other details that just don’t fit on the FAFSA or CSS Profile forms. Put all the details on paper as well. Don’t expect the financial aid director to rewrite the rules for you, but if you are honest and clear with them, they are likely to do their best to make their financial aid offer match the financial realities of your extended family. Q.
How hard is it to fill out a FAFSA
form and where can we get help? A.
Nine
out of ten families have said to me weeks after they finished filing
their FAFSA form, “Actually, it wasn’t as hard as I thought it would
be.” The
Free Application for Federal Student Aid (FAFSA) is the critical federal
form you need to fill out to receive any financial aid, whether from the
federal government, state governments, or colleges. If you don’t file
a FAFSA form, you won’t receive financial aid. If you don’t receive
financial aid, college can be very expensive and you will probably pay
more than you need to for a college education. Some families that have
adjusted gross incomes above $120,000 are filing a FAFSA form and
receiving financial aid. Even if you make $200,000 a year, you can still
qualify for unsubsidized Stafford Loans, which may be your best student
loan option, but you can't get them without filing a FAFSA. The
good news is that it really isn't very hard to fill out a FAFSA form . .
. usually. The bad news is that you often don't have much time to fill
it out. If you have just finished pushing your child to submit his or
her college applications at least fifteen minutes before a January 15th
college application deadline, there is no time for respite. Financial
aid forms are often due a month or less after the admissions application
deadline. If
completing your federal tax return is very complicated, then filling out
a FAFSA form may be somewhat complicated, but for the vast majority of
families, the FAFSA is quite straightforward – almost easy . . .
almost. What makes them a bit more complicated than they should be is
complicated family situations and the fact that many families are filing
their FAFSA forms in January or early February. It
is helpful to have completed your 1040 tax returns by the time you fill
out your FAFSA. If you are somewhat normal, your tax returns are not
finished by January or early February – more likely April 14th. That
means you have to estimate some of your 2006 1040 entries based on last
year’s 2005 1040 to complete the FAFSA. As imperfect as that may seem,
that is what many parents do. Do your best. You will be required to
submit your 2006 tax return to the college once it is completed. If your
estimates were way off, their financial aid offer may be too, but
nothing worse than that! The
print version of the FAFSA is basically a four-page form. The first page
is all personal information and is generally very easy to complete. Just
remember that the “you” they keep asking about is the student, even
though the student may be up in his room listening to music or out with
his friends while you labor through his FAFSA form so that he can get a
great college education, make lots of money, have a great career, and
remember to send you a birthday card each year . . . hopefully. The
second page asks about income the student earns – when he is not
working hard in school or up listening to music or out with his friends.
It also asks about any cash, savings accounts, checking accounts, or
other investments he may have in his name. The third page asks very
similar questions about the parents’ income, tax information, savings,
investments, and businesses they may own. The fourth and final page just
asks for information about what colleges you would like this information
sent to. Then you enter the date, the student has to put his iPod on
pause, come downstairs, and add his signature, then you sign, and you
are done. Before
you sit down with pencil or keyboard in hand, you should have with you
student and parent social security numbers, the student’s driver’s
license number, student and parent W-2’s, the most recent federal tax
returns, bank statements, investment statements, and any information
about business or real estate income, value, and debt or mortgages. You
should try to complete your FAFSA online (www.fafsa.ed.gov). You will
find plenty of good help there. Your guidance counselor may be able to
help also. If you have more complicated questions, call the financial
aid director at a college on your list. It is very unlikely that such a
conversation will hurt your financial aid offer; it will probably just
make it more accurate. I
suggest you view or download a copy of Completing the FAFSA from
the federal government before you sit down with the FAFSA itself. Go to
www.studentaid.ed.gov, click on Publications, and then Completing
the FAFSA. You are almost there. If that is too complicated, try . .
. http://studentaid.ed.gov/students/publications/completing_fafsa/2007_2008/index.html College
Goal Sunday is on January 28th in Almost
half of all people who are eligible for financial aid never apply for
financial aid. Don’t let bad rumors about filling out the FAFSA be the
reason you don’t get the financial aid you need. 45 minutes if you are
quick and smart and have your taxes done. 90 minutes if you are like me. Q.
Will
colleges ever change their financial aid offer once they have already
made you an offer so that you will be more likely to enroll? I get mixed
messages on this. A.
My answer is yes, no, and almost. So, I will probably just add to
the mixed messages. Financial
aid can be divided into "merit" aid and "need-based"
aid. Merit aid is money that may be offered you by a college in
recognition of some talent you have. Many colleges offer academic merit
scholarships for students with strong academic records or high test
scores. Some colleges offer athletic merit scholarships. Other merit
scholarships go to talented musicians or student leaders or to students
with some other skill. Colleges can and sometimes do change their merit
scholarship award if they are especially interested in ensuring that you
enroll at their college and not at another. So, there is my
"yes" answer. "Need-based"
financial aid is money awarded to you from college funds, federal funds,
or state funds in recognition of the fact that it will be very difficult
for you to afford a college education. I think I can probably say that
colleges will never change their need-based financial aid award just
because they really want you. That is because they have done a careful
calculation of how much they think you will need to afford their
college. How much they want you really doesn't fit into their
calculation of your financial need. These colleges will say, "No,
we don't negotiate." And
now for my "almost" answer. Colleges will not change your
financial aid calculation without reason. That means that they will
change your financial aid award if they are very interested in you, want
to ensure that you don't enroll at another school because that school
offered more money, and, if you give them information that will
enable them to recalculate their numbers. In some cases, these colleges
may be eager to do this, but they will be looking for just cause and
they will be happiest if you put that in print. That might be as simple
as a statement that you expect your income will go down next year or
that the numbers you presented on the FAFSA form or the CSS Profile
don't tell the real story. So,
if you have received a financial aid award that you don't think will
enable you to afford that college, I encourage you to call the financial
aid director at the college to discuss your concerns. You would be wise
to be very honest and open with them -- no mixed messages. Be prepared
to back up your concerns with numbers. And, be prepared to put those
numbers in the mail. Q. How do we know if it is worth it for us to apply for financial |
