Recently, I sat with a senior poised on the verge of going off to college. She has been accepted to her top choice college, has completed the Free Application for Federal Student Aid (FAFSA), and is from a family with very low income. She was reviewing the financial aid she had received so far and lamenting the fact that there was no way she could cover the difference between the federal and state aid she had received and the total cost of attendance at this university. Luckily, what she can see now in terms of federal and state grants is not the whole picture, and we were able to create a strategy to meet her college costs.
The problem with financial aid, and what makes the process so complicated and stressful, is that you can't see the full picture right away. After submitting the FAFSA, you should get an estimate on the federal Pell Grant you may qualify for, as well as any state grant money, but you can't see what the specific college will offer you until you get the award letter in the spring.
In addition, most undergraduate students with financial need will qualify for up to $5500 in student loans - $2500 subsidized (which means they don't accrue any interest while you're in school) and $3000 unsubsidized (you don't have to start paying them back until after you graduate, but they will accrue interest during this time). These loans, as well as the approximately $2000 in work study funds, may also not show up in your offer until you get the financial aid award letters from specific colleges in the spring.
The other problem, and unfortunate reality, is that college costs have risen faster than federal and state grants for education, and even for the most academically qualified students with the highest financial need, there is likely to be a gap of some sort between the aid offered and the cost of attendance.
So the bad news is, this process is confusing and stressful. The good news is, when the offer letters come, there will probably be additional aid available that will help you pay your college costs. The other good news is that there is a lot you can do to improve your ability to pay for college.
So what's a student to do? Below are some tips to help put yourself in the best possible position:
- Complete the FAFSA (www.fafsa.ed.gov) as soon as possible after January 1 your senior year. Be sure to complete it before the deadline for state aid (March 2 for California). You don't need to wait until your taxes are done; you can use estimated values for income and go back and revise the numbers after you've completed your taxes.
- Check out the financial aid website for the colleges you are applying to and make sure you know the deadlines for scholarship applications, and APPLY before those deadlines. Be careful, these deadlines may be earlier than the actual college application deadline.
- Spend some time on scholarship searches. I'm amazed at how many students don't follow through on this. I'll hear "that's too much work", and I'm thinking "It's $2000!! It's worth a little work!" Yes, it takes time and effort, but if you spend 10 hours on scholarship applications and receive a scholarship for $2000, you've essentially just made $200 per hour. One of my favorite scholarship search sites is www.petersons.com.
- Apply to at least 4 colleges or universities. Each school will offer a different financial aid package, and some will be better than others. Applying to a variety of schools will increase the likelihood you'll get a financial aid offer that will work for you.
- Don't be afraid of loans if you need them to pay for school. Obviously, you want to be prudent and minimize your student debt, but the average college graduate (with a bachelor's degree) will earn, on average about $1 million more than the average high school graduate. Think of it as an investment in your future. You can also look into income based repayment plans to ease the pain of repayment. (Disclaimer: I am not a financial advisor and am not qualified to give financial advice. Please see your CPA or other financial advisor for financial advice related to your specific situation).
Finally, I'd like to end with this great infographic on myths about financial aid: 8 Myths About Financial Aid.
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