Nobody wants to pay more than they have to, given the high price of a college education. Unfortunately, thousands of families overpay for college each year because they are unaware of the fundamentals of financial aid and do not know what questions to pose. Learn the fundamentals first, and then ask the right questions.
Basics, First
Grants or scholarships, loans, and work-study programs are the three primary sources of financial aid for education.
Scholarships and grants are gifts that you don’t have to pay back.
Federal, state, or particular Colorado Springs colleges provide most grants and scholarships.
After college, loans must be repaid
The federal and state governments both provide a variety of financing schemes. These loans generally have low-interest rates. Private loans are also an option, albeit they typically have higher interest rates.
A job is available for work-study students on the college campus
- Basics, Second
- Comparing need-based and merit-based help
- All institutions offer need-based financial help to students who qualify. Anyone unable to cover the entire cost of education has a need.
The Free Application for Federal Student Aid (FAFSA) is a document to assess applicants’ financial need for federal grants and scholarships. A form known as the Profile form is also necessary for several highly selective universities. After January 1 of the year, the student will enroll in college for the first time, and the FAFSA form is completed.
Using the data you provided on your tax returns, the FAFSA and Profile forms offer questions about the parent’s and students’ income. Your savings and investment balance may also be questioned on these forms. Compared to the FAFSA form, the Profile form is more thorough. The government uses the FAFSA form to calculate how much your family can afford to pay for college after submitting these forms. This is referred to as your EFC or anticipated family contribution. No matter how much the college costs, your EFC remains the same. Similarly, the various universities that use the Profile use that form to ascertain how much your family can afford to put toward college.
The cost of the college you’re considering minus your EFC equals your need. You need at that college, for instance, would be $15,000 if it costs $20,000 per year, and your EFC is $5,000. Your EFC is still $5,000 if you consider a college that costs $40,000 a year. You’ll need $35,000 to attend this university.
Scholarships are a common type of merit-based financial help for students who demonstrate academic excellence or possess a unique talent, such as the musical or athletic ability. Unfortunately, most highly selective universities provide little to no help based on merit.
Finally, it would help if you neglected tuition costs when evaluating institutions. You did read that correctly. When selecting which institutions to further research, disregard the college’s advertised fee. Later on in this post, you’ll learn why.
You now understand the fundamentals. The exciting part is learning how to ask the appropriate questions to save money.
How much of my needs do you meet, on average?
Recall the anticipated family contribution (EFC) that the FAFSA calculated. Some universities will cover all of your expenses. The expense of education less your EFC is considered your need again. What does it mean when a college promises to cover all of your expenses? The college will cover 100% of the remaining costs once the FAFSA or Profile form has established how much you can afford to pay for education.
Typically, colleges combine grants, loans, and work-study to fulfill your needs. Most universities will give out work-study and loans first; if there is still a need after that, grants will be used to fill it. When researching a college, you should find out what the institution gives the regular loan and work-study amounts.
Let’s look at an illustration of a financial aid package from a college that meets all the financial needs of a student with an EFC of $5,000.
- $40000 is the total expense of college.
- Family contribution anticipated at $5,000
- Need $35,000
- financial aid award
- Study abroad: $2,000
- Loans $ 4,000
- provides $29,000
- You pay $5,000 to attend a college that covers your expenses.
What transpires, though, if the college cannot satisfy every need? Unfortunately, many less prestigious universities don’t cover all their students’ needs. Using the hypothetical college from earlier as an example, let’s say that just 90% of what is required is met by the institution this time.
This illustration makes it simple to understand why a school that meets 100% of needs is frequently a better financial aid offer than a school that does not.
While many of the most expensive private institutions provide 100% of what students require, less-priced public colleges frequently provide less than 100%. Therefore, attending an expensive private college may be more affordable for many students than attending a less expensive state school. Please do not rule out an institution because it is pricey unless you know what proportion of your needs it will meet.
Do you offer merit-based financial aid?
Many institutions grant scholarships to some students even when they can’t fully meet their financial needs. If your student is towards the top of the applicant pool for a less selective college, they can be eligible for financial help based on merit. As a result, in some circumstances, the student may receive a higher financial assistance package if they are willing to consider a less selective university. If the college offers merit aid, you should ask the following questions.
How many merit prizes are offered?
What are the merit awards that are offered worth?
What requirements must you meet to qualify for one of these merit awards?
Even families not eligible for any need-based assistance can benefit from this. In addition, you won’t have to cover the entire stated cost of the institution if your student is eligible for a merit-based award.
How is financial help determined after the first year
Some institutions have a policy of offering competitive financial aid the first year while significantly cutting grants and raising borrowing the following two years. Therefore, you should enquire at the college you are considering about how they decide on financial aid after the first year and what the typical loan is. While an annual increase in loan amounts is average, if the increase is significant, you should take that into account.