Financial Aid in a Changing World

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With the economy gaining some steam but still not up to speed, it’s no wonder that many high school students and their families are worried about how they are going to pay for college. It’s also no secret that the price tag for attendance at most colleges continues to rise. The College Board, in its college prices study for the 2011–2012 school year, reported that 123 institutions list their cost at more than $50,000.

“In an era of persistently high unemployment, family incomes that fail to keep up with inflation, and savings that have been eroded by declining stock market values, colleges are relying on tuition for an increasing share of their revenues,” says Sandy Baum, an independent policy analyst for the College Board. “At a time when students and families are ill-equipped to manage additional expenses, student financial aid is more important than ever.”

But financial aid can be hard to come by. An annual survey of about 204,000 high school students, The American Freshman: National Norms Fall 2011, found the percentage of students who received financing from scholarships or grants had dipped 4% from 2010, and the dollar value on those awards had also declined. Changes in federal policy are not helping matters this year either, with debates on student loan interest rates and cuts for Pell grant eligibility.

While you need to recognize the stark reality, all is not gloom and doom. As Anna Leider, author of Don’t Miss Out: The Ambitious Student’s Guide to Financial Aid, says, “Families consistently overestimate the cost of college and underestimate the availability of financial aid.”

As a student heading to college, consider a few positives: The cost of college may not be as high as you think. The College Board reports nearly half of all students are attending a four-year college where the sticker price is less than $9,936 a year. With financial aid included, most students pay less than that.

More than 60% of students receive some form of financial aid. Depending on your circumstances and qualifications, an “expensive” college may offer a generous aid package—so don’t automatically rule out the school with a big price tag. “The best thing to do is educate yourself on your financial packages at each school you’re thinking about attending,” says Katrina Wells, a senior at Lebanon Valley College in Annville, Pennsylvania.

Extra effort can equal extra aid. Leave no stone unturned in your hunt for financial aid; make sure you explore aid from the federal government, states, private sources (such as scholarships and grants), and institutional aid from your college choice.

The more you learn, the more you can earn. Bureau of Labor Statistics surveys for 2011 show that those who have earned a bachelor’s degree had median weekly earnings of $1,053 compared to $638 for those with only a high school diploma. Those with a master’s earned $1,263, and those with a professional degree earned $1,665. Also, higher education equals lower unemployment; the average unemployment for a bachelor’s degree holder was 4.9% compared to 9.4% for those who only held a high school diploma. Unemployment drops to 3.6% with a master’s degree and 2.4% with a professional degree.

Planning for all four years

“The #1 priority for students is to come up with a strategy to pay for college for all four years—not just the first year,” says Tommy Blair, Director of Financial Aid at Roanoke College in Salem, Virginia.

Natalie Rooney, now a senior at University of Missouri (Mizzou) in Columbia, started her college journey with family savings, loans, and a merit scholarship from the University. She knew those funds would basically cover her first two years, but after that, her payment plan was foggy.

With her college savings dwindling after sophomore year, Rooney had to hunt for more funding, so she applied for as many scholarships as she could. “I’ve won a lot of scholarships because of my involvement on campus,” Rooney says. “I’m president of my Kappa Delta chapter, and I’m doing work in the community.” She has also given her time to blood drives, shelters for abused children, and assisting the homeless.

“I would highly encourage continuing to search for scholarships throughout college,” Rooney says. “As you continue your education, a lot more opportunities open for different scholarships. It helps so much to even have a couple thousand extra dollars for the year.”

File the FAFSA!

While searching for scholarships should be a big part of your plan to pay for college, make sure you also complete the Free Application for Federal Student Aid (FAFSA).

“A lot of students don’t fill out the FAFSA because they think they won’t qualify,” says Wil Casaine, Director of Financial Aid at the College of New Jersey in Ewing Township. “But it’s free, and everyone can qualify for a federal loan. Plus, someone who doesn’t fill out a FAFSA may get looked over for institutional aid.” Truly, you have absolutely nothing
to lose by submitting the FAFSA.

Those attending a community college should fill out the FAFSA too, says Terry Bazan, Director of Student Assistance at Austin Community College (ACC) in Texas. “Community colleges may be low-cost institutions, but many of our students qualify for aid,” she says.

That has certainly been the case for Sonya Dryz, who is working toward an associate degree in English at ACC. For the 2011–2012 school year, she qualified for the maximum Pell Grant of $5,550, $4,440 in federal work-study, and $3,500 in loans.

From the personal financial information you provide on the FAFSA, processors determine your Expected Family Contribution (EFC)—an amount you and your family are expected to pay for college. The total cost of a college minus your EFC equals your financial need. How much you qualify for in financial aid depends on your need. Colleges put together aid packages that try to meet that need.

The Formula for Financial Aid:
Cost of College – EFC = Need

Dana Parker, Director of Financial Aid at West Chester University of Pennsylvania, emphasizes that while colleges will try to meet a student’s need, there are no guarantees. “Some schools can come up with a financial aid package to meet the total unmet need of a student, but a whole lot can’t.”

In general, you want to file your FAFSA as soon as possible after October 1, starting your senior year of high school and again for every year you're enrolled in college. For example, to get financial aid for the 2017–2018 school year, you should file as soon as you can after October 1, 2016, using tax information for 2015. Again, be sure to apply every year! And remember that financial aid is typically first come, first served!

Also keep in mind that your financial aid package isn’t necessarily set in stone, even after you file the FAFSA. “If something changes after filing the FAFSA—a parent loses a job, work hours are reduced, a divorce, separation, death in the family, or major medical crisis—we advise students to come talk to us so we can take a second look,” says Ann Klein, Financial Aid Director at the University of California, San Diego. “We help students who have significantly changed circumstances.”

For more information on the FAFSA, visit fafsa.ed.gov.

A word of warning on loans

For many students, federal direct loans are a significant part of their aid package. If you demonstrate sufficient need, you can get low-interest subsidized federal loans, on which the federal government pays the interest while you are enrolled in college. There are also unsubsidized federal loans that are available regardless of need. However, there are limits on how much you can borrow; find out more at direct.ed.gov.

Students may have to take out private loans as well. Wells estimates that she will leave Lebanon Valley College with a total loan debt of $35,000 in combined federal and private loans. “My focus has been on getting an education and finding a way to make that work, even if I’ll be paying off loans in the future,” she says. “I definitely looked at how much I’d be paying back per month after I graduated. One of the best things I did was seek out an on-campus work-study job. The supplemental income enabled me to pay for books each semester, and I was also able to make payments on some of my private loans, which has helped to keep down future repayment costs.”

Blair at Roanoke College says, “If you borrow within reasonable, manageable limits, it’s an investment that’s going to provide a return. There has to be some reconciliation between what your potential income will be like and what your loan indebtedness will be.” He recommends checking a repayment calculator, like the one on paybacksmarter.com, which shows what monthly loan payments can be based on total borrowing.

Brain power still pays

While much of financial aid is need-based, college dollars are given based on merit as well. Often, “merit” means smarts, and good grades can lead to more funds. Wells got scholarships for maintaining a high GPA within her major of history and historical communications. “The faculty picks one to two students a year to win a full-tuition scholarship, and I was able to get one for my junior and senior years.” Use an online search service like the scholarship search on this site and you’ll find scores of scholarships for college-bound high school students who perform well academically or have other talents in the arts, athletics, etc.

Think creatively

Sometimes students have to think outside of the box to come up with clever ways to afford college. For example, working as a residence advisor can earn you free or discounted housing. Parker at West Chester University shared the story of a student who worked as a nanny, taking college classes when the kids went to school and receiving free housing and a paycheck from the family.

“I had a student once who applied for a job as a janitor at the college,” says College of New Jersey’s Casaine. “By working as a full-time janitor, he got a tuition waiver. He paid for fees and that’s it.”

Miles Bryan, a senior and a history major at Reed College in Portland, Oregon, figured out a way to save by taking a semester abroad. “A semester at Reed is about $20,000,” says Bryan. “In London at King’s College, tuition was $7,000 or $8,000. Reed doesn’t have a program with King’s College, so I went to all my professors to make sure I could get the credits transferred and then paid King’s College directly.”

As a cash-strapped student, Bryan borrows textbooks from the library rather than buying them. “I moved off campus as soon as I could to save money,” he adds. “I went from paying maybe $800 a month for a dorm and $600 for food to $300 a month for an apartment and about $300 a month for food.”

Sonya Dryz at ACC saves by renting textbooks, and she takes advantage of her status as a student to get a free bus pass. Aiming to eventually get her bachelor’s degree, Dryz has saved a lot by attending community college. She intends to transfer to a four-year college to finish out her final two years.

“Don’t be deterred if your dream school is more expensive than you had planned on, because there are ways to pay for it,” says Rooney. “It’s up to you to figure it out—look for the scholarships, loans, and other types of aid. You have to put in the work. But if you put in the work, you will be rewarded, and it will make paying for the college experience much easier. I’m not going to get out of the college with no loans. I’ll be paying back for a while, but I wouldn’t trade my four years here for anything else.”

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