College Tuition Tips

College Life, Credit and Debit, Family Organization, Financial Responsibility, Planning & Money Management | Wednesday, February 8th, 2017

College tuition is an increasing cost that requires families to make payments they cannot financially support. The generation of parents and their children who are attending college today are in unique situation in that most are experiencing this for the first time together. The percentage of high school students attending college immediately after high school has been growing ever since 1972 meaning there is a better chance their parents did not attend college. This causes numerous amounts of financial issues to arise as both parents and students are attempting to figure out loans, grants, etc. while also dealing with their daily lives. Fortunately, financial experts have realized this issue and taken action to help educate people in order to ensure this process is error free.

The first step to the financial aid process is filling out the FAFSA (Free Application for Federal Student Aid). This form is required by all colleges that accept and award financial aid and can be found at FAFSA determines the amount that the student or family will be contributing to their postsecondary education. Results from the FAFSA determine student grants, loan amounts, and work-study. FAFSA only takes about an hour to complete and the results are extremely helpful when organizing your financial plan for the future.

College financial assistance is broken down into three categories; grants, loans, and other (tax benefits, work study, other federal programs). A grant provides money that does not need to be paid back and it can come from either the state or federal government. The percentage of money borrowed through grants is 49%. Categories of these grants include Institutional grants, federal grants, Private & Employer grants, and State grants. Some of the more popular grants include Federal Pell Grants, Federal Supplemental Educational Opportunity Grants (FSEOG), Academic Competiveness Grant (ACG), Teacher Education Assistance for College and Higher Education Grant (TEACH Grant), State Grants, and Institutional Grants. A loan is different in that must be paid back, but the benefit of student loans is they do not have to be paid back until after post-graduation. In addition, the rates and terms are generally flexible making them a solid option for borrowing money. There are many different types of student loans that each have different features and when making choices on loans it is important to understand each one.

  • Stafford Loans- low, fixed interest rates but lower borrowing limits. Students often need to find another source of funding to meet their financial needs.
    • Subsidized Loans- while enrolled, no interest accrues but students must qualify by showing their need of financial aid through the FAFSA
    • Unsubsidized- interest does accrue when enrolled, but most students qualify for this loan regardless of their needs
  • Perkins Loans- obtained directly through the school with very limited availability. Low, fixed interest rates with lower borrowing limits
  • PLUS (Parent Loan for Undergraduate Students)- federal student loans for parents of undergraduate students. Fixed interest rate with higher borrowing limits
  • Graduate PLUS loans- federal student loans for Graduate or Professional Program Students. Fixed interest rate and higher borrowing limits. Meant to supplement Stafford loans.

Understanding the concepts of each of these categories is important when deciding which route to take for the future. 66% of college graduates graduate with debt and this number is increasing annually. Having an idea of how much one is willing to take out in loans or grants is a head start when beginning to search for schools. This better understanding allows for the selection process to go much easier when narrowing down the options as finances take a big role in choosing the perfect school. Filling out the FAFSA as early as possible is the best course of action as it allows parents to understand their financial stance and what kind of help they would be receiving once their child is enrolled. The next step is to be proactive when visiting schools and going on tours. Understanding what type of financial programs each school has to offer is a strategic advantage when making the final decision on schools. Some colleges may offer a counselor on visiting days that will discuss the financial programs offered by the school, parent’s eligibility, and the rate of availability.

Jack Purcell

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