Financing College Exploring Your Options

Career World, Sept, 2001 by Anne Austin

The cost of college goes up every year. But if you want to go, you can find a way to meet those costs.

Think of college as an investment in your future. Studies show that college graduates earn 77 percent more than those with only a high school diploma. If you look at the potential earnings, you really can't afford not to go.

College can be a hefty investment, though. Peterson's Guide to College estimates that four years at a private college can cost up to $100,000; the same degree from a state school could run $30,000 to $50,000. But don't let sticker shock scare you away. Approximately $68 billion in aid was available this year, according to a study released by the College Board this April. The federal government distributed $30 billion to 7 million students; colleges distributed another $8 billion. The remaining aid came from a variety of sources.

How Financial Aid Is Figured

To find out about a financial aid package, start with the school's "cost of attendance." This is the amount it costs a student to pay for the whole experience--tuition, fees, books, room and board, transportation, and personal expenses.

Subtract from that amount the "Expected Family Contribution (EFC)," calculated from the financial information your parents submit concerning both income and expenses of the family. EFC should be funded out of cash, savings, and loans, and not from current earnings alone.

Don't panic if the difference looks like more money than you can afford. It's the amount that needs to be financed with aid. Financial aid specialists recommend you apply for aid whether or not you think you'll qualify. Submit the FAFSA (Free Application for Federal Student Aid) and any forms the school requires. Above all, meet the deadlines.

The financial aid office will put together a package with a combination of the four basic forms of aid: scholarships, grants, loans, and work-study.

1. Scholarships

Scholarships are the best form of aid because the money does not have to be repaid. The application process often requires you to write a special essay or be interviewed. Scholarships are generally awarded for merit.

Scholarship sources can include the college itself, civic clubs, unions, foundations, and religious groups. Most states offer scholarship programs to residents to attend in-state colleges. Usually, these are awarded based on grades and financial need.

To find out what's available, a good place to start is the scholarship database at www.finaid.com and similar sites. Check out "Searching for Scholarships" on pages 4-5 of Career World. Beware of services that ask you to pay a fee to locate money--they usually are scams.

2. Grants

Grants are also awards of money that do not have to be repaid. Unlike scholarships, the primary eligibility requirement for a grant is financial need. Need is calculated using a formula established by the federal or state government. The largest grant program is the Pell Grant, funded by the federal government. Students received up to $3,300 in the 2000-2001 academic year the amount increases slightly from year to year.

3. Loans

Loans are financial aid that you have to repay. Fifty-nine percent of all aid is in the form of loans; the average student graduates with a loan/debt of $16,500.

The best source is the Federal Stafford Loan program. You won't begin making payments until you leave school. Students with exceptional financial need may qualify for the federally funded, campus-based Perkins Loan.

Your parents may qualify for a PLUS (Parent Loan for Undergraduate Students) as a way to cover the EFC (Expected Family Contribution). Home equity loans or a line of credit are also possibilities.

4. Work-Study

The fourth form of aid is work-study. The work--study program on most campuses is a two-part program. In order to qualify for federal work--study, the student must meet federal eligibility based on financial need. The college provides the job, but the federal government pays part of the wage (the student doesn't see a split check, but this makes a big difference to the institution's ability to hire students). The college also might offer institutional work-study, which has no eligibility requirements other than the student be qualified to do the job. Usually students are allowed to work 20 hours a week Pay is minimum wage unless the job they fill is more specialized. Students often work as lab assistants in computer labs, shelvers in the library, and clerks. They may also do data entry and filing in college offices, and so on. The main advantages are that the work is on campus, the employer works around the student's schedule, and the student has the ability to make contacts or get experience if the work is i n the area of his or her major.

If you're willing to commit several years after graduation to work for the government or another agency, you can work a deal. Government agencies at both the state and federal levels offer "loan forgiveness" or scholarship programs. A scholarship program pays your costs upfront. In a loan forgiveness program, you pay for college upfront with loans, etc., and the agency pays off the loans for you. Federal programs include the National Service Scholarship Program, AmeriCorps, Learn and Serve America, and Senior Corps. States often offer loan forgiveness to students in under-represented fields such as teaching and health care.