“Aside from your home, a four-year college education may be the largest expenditure you’ll ever make,” according to Theodore E. Hughes and David Klein in their book, The Parents’ Financial Survival Guide.
Four years of college can cost thousands of dollars, while advanced and professional degrees taking up to seven years or more, can run about a hundred thousand dollars. The expenses include tuition, fees, room and board, books, supplies, and personal expenses such as clothing, medical and auto insurance, transportation, trips home, vacations, entertainment, and emergencies.
Your up-front expenses (tuition, fees, and room and board) must be paid prior to starting college and are met through family contributions, federal grants, loans, scholarships, and institutional aid. Other expenses, such as living expenses and travel, can be spread out over the school year and met through the parents’ monthly income and the student’s employment.
Federal aid, the first place to begin looking for aid
The first place to begin looking for financial aid is the federal financial aid program. While the student’s family is expected to pay for educational expenses to the extent that they are able, the U.S. Department of Education has committed financial resources to help students pay for their education.
A Free Application for Federal Student Aid or FAFSA form is used to determine a family’s expected contribution or EFC. The difference between the cost of attendance and your family’s Expected Family Contribution is considered “unmet need“. Financial aid officers at the college you will attend use your unmet need to determine your financial aid package. The cost of attendance is determined by each institution and is available from their financial aid offices. Generally, if your EFC is below $5,000, you are considered to have financial need and are considered Pell Grant eligible. Over 50 percent of today’s students receive need-based aid.
Federal funds can come in the form:
- Grants (free monies that do not need to be repaid)
- Low-interest student loans, subsidized and unsubsidized
- Federal work-study programs
Education Tax Credits and other educational initiatives
Students from mid-income families who do not quality for federal grants (free money), may be eligible for a number of federal education tax credits. The American Opportunity Credit is a tax credit that allows eligible taxpayers a tax credit of up to $2,500 per student for their first four years of college. Other educational tax initiatives include the the Lifetime Learning Tax Credit, deduction of student loan interest, and penalty-free withdrawals from an educational IRA. See the IRS Tax Incentives for Higher Education Expenses for more detailed information about these federal tax initiatives,
There may still be a gap in aid and costs
It is unlikely that a student will receive enough financial aid, subsidized loans, and non-financial need scholarships to cover 100% of the cost of attending a particular college, according to Stephan Pollan and Mark Levine in their book “Surviving the Squeeze.” There will still be a gap between aid and cost, and unless you have enough discretionary funds available to cover this gap, you must turn to other options such as non-subsidized parant loans (available through commercial lenders i.e. Sallie Mae, banks, credit unions), scholarships, or equity, personal and mortgage loans.
When using commercial lenders, you should be aware that while interest rates are of prime concern, it is also important to look at when the loan pay-back begins. Some lenders require payments to begin 60 days after the check is released. Pollan and Levine suggest the following strategies for reducing bills and coming up with more money:
- Apply for private scholarships (see our Scholarship Listings)
- Weigh financial aid offers between schools
- Take advanced placement courses in high school (college credit earned in high school reduces college costs)
- Create your own work-study programs
- Shop for tuition breaks
- Attend a community college and transfer after the first or second year of your 4-year degree
- Weigh the option of becoming a teacher; some states pay off some portion of the student loans for those who teach for four years in their state
- Investigate co-op programs
- Join the military, National Guard or ROTC program to be eligible for their education programs
- Look into the Western Undergraduate Education (WUE) program for reduced tuition at certain Western State colleges
- If you are attending college out-of-state, you can attend a lower-priced community college for your first or second years, then transfer into the four-year college or university of your choice
- Investigate your college’s residency requirements (for public schools only), then consider meeting them to qualify for lower-cost in-state tuition.