When families are thinking about providing a college education for their child, they need to have a plan.
If you were driving from New York City to Los Angeles you would need an interstate map or a turn by turn navigation system. With out some sort of navigation guide, you may encounter unexpected roadwork, detours and pay additional costs for gas, food & lodging. Planning for college is similar to a cross country adventure. A college planning system can greatly reduce costs and increase the likelihood of graduating in 4 years with employment opportunities after graduation.
The dilemma for parents of college bound students is how to provide for a good education without wiping out their savings or retirement OR putting debt on their home or business. This is where the college roadmap or “Game Plan” is so critical and often overlooked. How can you maximize your college Investment? How do you find the “Best Fit” for your student? How will you pay for it?
According to the National Center for Education Statistics (nces.ed.gov) 59% of First Time, Full Time students seeking a Bachelor’s degree complete the degree within 6 years! This means that it may take 1 to 2 years longer to complete the four year degree and may increase your total college costs by 25% -50% because you are paying for an extra 1 or 2 years! Finding the “Right College” reduces the chances of students transferring or dropping out and increases the chances of graduating in 4 years.
Paying for college can become a retirement problem for parents. Baby Boomers have had children later in life and may be 55, 57 or over 60 years old when their youngest child graduates from college. Very few parents have saved over $5,000 for college, and the price of college only continues to rise. Here are costs for incoming freshman for the 2016-2017 academic year for a Full-time Undergraduate Student living on campus. (Tuition & fees room & board, books, personal expenses):
- University of Southern California $69,711
- UCLA $34,062 (in state) $60,744 (out of state)
So, how do families pay for college? First there is your money which includes your savings, 529 plans, your current income and loans. Then there is other people’s money which includes gifts from grandparents, financial aid from the government and the universities, and Tax and Cash Flow strategies. Realistically it is combination of your money and other people’s money.
First let’s look at financial aid. The good news is many families qualify for financial aid even though they think they earn too much money. Colleges are in competition for students and have empty seats to fill. Colleges will pay for good students. 90% of students attending private colleges receive some form of financial aid. (www.naicu.edu)
The bulk of financial aid comes from the Government (Federal & State) and from the Universities themselves. The aid may be Gift Aid which includes Grants & Scholarships and does not have to be repaid or, Self Help Aid which includes Education Loans(which have to be repaid) or work/study which is part time campus work which pays the student..
There are 2 types of Financial Aid.
Merit Aid is based on the Merit of the student - For example, strong academics, talent such as athletics, artistic ability or strong leadership. Merit aid is awarded solely on the merit of the student – it does NOT matter how much money the family makes. Merit Aid is considered Gift Aid and does not need to be repaid.
Need Based Aid is based on the student and family’s income and assets. Need Based Aid is only awarded to families with need. Need Based Aid may be in the form of Scholarships and Grants which do not have to be repaid or it may also be in the form Self-Help Aid such as Education Loans (which need to be repaid) or work/study.
To receive Financial Aid, families must fill out required Financial Aid forms. There are Several Financial Aid Forms
FAFSA Form (Free Application for Federal Student Aid) – this form is required by all public and private college to disburse financial aid and Federal student loans. The FAFSA is based on the family’s income and assets. Much of the data on the form is generated from the parent’s and student’s income tax return.
CSS Profile form-some Private Colleges and Universities require this form. In addition to Federal money, the private universities have their own endowment funds to award Scholarships and Grants to students and they ask additional questions which are not on the FAFSA.
Each individual college may have their own form in addition to the FAFSA and CSS Profile
Private Colleges generally meet a higher percentage of need and award a higher percentage of gift aid. Many students can attend a private college for the same cost or less than a public university!
What can High School Students do to maximize their college investment?
Do career and college research to find a college which is a good fit.
Increase your possibilities for Merit Aid - Challenge yourself in High School – Do your best and work hard for good grades
Be involved in HS activities – You don’t need to be a member of every club, but find an activity that interests you and participate.
Visit colleges and universities in your area to get a feel for what campus life is all about.
Proper planning during High School can save your family money and maximize your college investment!