Paying for College Part 1: The Basics

Monday, August 04, 2014

You have worked hard in high school for four years, taken challenging courses, earned excellent grades, studied for and scored well on the SAT or ACT, been active in clubs and/or athletics, and have contributed time and energy to community service.  It all seems to have been worth the effort as you receive acceptance letters from the colleges of your choice. But there is a problem…

Your financial aid awards, from the same institutions that are welcoming you with enthusiasm, are not what you and your parents had expected. The EFCs (expected family contributions) after scholarships, grants, work study, and loans is more than anticipated, and suddenly attending your dream school appears to be out of reach.

The above scenario plays out in tens of thousands (or more) households around the nation, when those thick envelopes or congratulatory e-mails start arriving in March and April.

The financial aid award you receive will consist of a combination of scholarships, grants, work study, and loans. The first two represent “gifts,” funds that you do not have to pay back. Work study involves having a part time job on campus for which you are paid, and that income goes toward your annual college bill. You give up free/study time, in return for funds applied toward your basic expenses. Loans have to be repaid after you graduate. They are the least desirable type of financial aid, and can add up quickly. Many students graduate with $15-30,000 to repay. It is best to try to avoid loans, but those of modest amounts might be worth the debt, if the college and its programs are outstanding.

What do you do to pay for college if the cost will be a burden?

Before I offer suggestions, remember that earning a post-secondary school degree is your key to success in the adult world, and you want to do everything in your power to achieve that goal. Work with your parents to develop a strategy that all of you believe will yield positive results!

That having been said, the best solution is to plan ahead, taking into account all the costs, financial resources, contingencies, opportunities, and alternatives available. When you are researching colleges, be sure to visit the financial aid pages on-line, or talk with a financial aid advisor during a college visit. Be sure you know what all the costs are…travel, incidental expenses, tickets to special events, dorm dues, and others. These are over and above the basics – tuition, room, board, books, and supplies.

By federal law, all colleges are now required to have college cost calculators on their web sites, allowing you and your parents to get a realistic idea of EFC cost per year. Use it early, so you can plan and prepare, and perhaps replace some costly schools with others more affordable.

The calculators are accurate to about 5% for the current academic year, assuming you input correct figures. Be sure to use the calculator annually to account for cost increases, inflation, and changing circumstances. The number you saw as a high school sophomore may be different than what you see as a senior.