While the national conversation around the importance of continuing education past high school gains much attention, so to does the issues surrounding paying for it. Regardless of politics, the fact remains that paying for college stands as one of the biggest challenges for students and their families.
Getting a head-start on putting together a financial plan is always a good idea for any prospective student. Here are some tips for families to consider now to ensure that they limit the amount of student loan debt accrued while still in school:
Borrow only the amount you need
Many borrowers make the mistake of taking out more loans than necessary. To avoid doing this, create a budget to determine how much loan money will be needed and avoid using loan money to pay for unnecessary expenses, such as trips to the movie theater or expensive dinners.
Consider a part-time job
If a student’s academic schedule allows, they should consider finding a part-time job on campus to help supplement the cost of unexpected expenses. Be sure to check with the financial aid office to see if students qualify for work study, which gives the opportunity to work on campus.
Compare award letters
Once a student receives their financial aid award letter, compare loan offers by reading the fine print. If federal loans are not enough to cover the cost of education and a student is considering private loan offers, be sure to shop around for the best interest rates and repayment options.
Take college credit while in high school
Taking AP, dual credit or college credit courses while in high school can give students a head start on achieving your intended major. Find out the general education requirements at the college a student plans to attend and take courses that will fulfill those requirements. Doing this can help students graduate from college early, which means borrowing less in student loans.
Consider paying loan interest while still in school
Students who start making interest payments on their student loans while still in college will reduce the total amount they have to repay after graduation. Interest payments are usually manageable. By paying off interest as they go, students can keep outstanding interest from capitalizing on any balances. Allowing interest to capitalize increases loan balances essentially requiring students to pay interest on the interest that has been accrued!
Apply for scholarships
Scholarships can pay for portions or all of a student’s education during an academic year. But students can’t earn scholarships if they don’t apply! Find scholarships specific to a school or department by talking to a representative from the school’s financial aid office or department chair. In addition, the following sites are just a few places to check for scholarships:
- Fast Web – www.FastWeb.com
- Big Future by the College Board – https://bigfuture.collegeboard.org
- Sallie Mae Scholarship Search – www.salliemae.com/scholarships
- Scholarship America – https://scholarshipamerica.org/
Choose a school that fits into the family budget
Review the financial aid packages from the colleges where students applied and consider how much needs to be borrowed in order to attend each. Keep the goal in mind and select a college where loan debt can be kept at a reasonable level against future income potential.
Get more tips in Iowa College Aid’s “Path to College.”
They’ve waited. They’ve watched the mail for weeks. Finally, the letter arrived: Students are getting notice that they’ve been accepted to the school of their dreams! But after the moment of excitement and congratulations wears off , the realization sets in: it’s going to cost money to go to school.
Even if a family has prepared for years, saving money, investing in 529 plans and being on top of completing their student’s FAFSA, now is a crucial time to pay attention to information from schools and have a clear understanding of the financial aid award letter.
Financial aid award letters are sent to students in the weeks after receiving their acceptance letter to a school and reflects the cost of attendance as well as the financial options available to families to help pay for their student’s education. As the letters state, a student’s place in the schools incoming class cannot be reserved until a deposit is received based on the financial award letter. But families should take the time to understand their award letter before submitting any form of deposit, as these deposits are not refundable if a student decides not to attend a particular school.
Currently, there is no standard format for schools to report the financial aid being offered to a student. So families should use these tips to better understand what is being offered and make a smart comparison between what different schools will cost. The school with the lowest tuition fees might not always be the best financial choice thanks to financial aid awards. Knowing how to read the financial aid award letter can make all the difference.
- Find “free money”
Many schools offer students institutional scholarships or grants. These types of funding can be seen as “free money” because students and families don’t have to repay this money after graduation. Make sure to look for words such as “scholarship” or “grant” in the name of the financial award. These awards are often given to students based on the information in the Student Aid Report created when completing the FAFSA, based on income or family responsibility. Families may miss these awards because they do not technically apply for them separately.
- Consider loans and work study options separately
To help show families how they can meet the cost of attendance at their school, award letters will also include options that require repayable loans or other options that require further action by the student, such as work study programs. Since there is no standard format for separating these options from other “free money,” families need to recognize that any loans taken out, be they private or federal Stafford loans, will require repayment by either the student or parent (depending on the loan) after graduation. This is not funds being offered by the school, but money that will require repayment.
- Know the difference between “direct” and “indirect” costs.
Attending college features a variety of costs, but not all of them will necessarily be covered the financial aid offered in the award letter. The “cost of attendance” on a financial aid award letter applies to direct school costs, such as tuition, room and board. Indirect costs, such as books for classes or travel to and from school are not considered in an award letter. These costs are those that the student and family will have to bear personally.
- Determine if awards are for one year or more.
Many families fall into the trap of thinking that the financial award letter reflects the costs and awards for all four years of school when, in reality, the letter reflects the cost for one year of school. While many of the loans listed on an award letter will be available to students each year, many of the grants or scholarships listed may require a new application each year or, in some cases, are only available for one year. Determining which of these awards are renewable, or the length of the award, can help families avoid an unpleasant surprise.
- Make sure the award letter is final.
In some cases, an award letter might not reflect the final amount of aid being offered to a student. If any section of the letter uses words such as “estimated,” “tentative” or “pending,” the school may not have all the information from a student’s FAFSA or other document needed to make a final determination of aid. Once this information is provided, it may have an impact on the amount of aid that the student is finally offered.
Understanding the financial award letter that students receive can lead to some difficult decisions about where a student should go to school. By making the best effort to compare award letters from all schools that have accepted a student, families can make an informed choice of which school fits best with a student’s goals while creating a financial plan that will avoid any bad surprises or unexpected debt down the road.
Financial Aid Awareness Month is dedicated to helping families and students of all ages better understand the options available to them as they look to fund their educational goals and dreams. Iowa College Aid has dedicated a page to discussing some of the common issues facing those looking for financial aid.
Our staff of financial aid experts have also helped out this month, with advice on how to overcome financial aid issues (see last week’s post). This week they address two of the common myths that students have about applying for grants and scholarships and how to debunk them.
Myth #1: We make too much/my parents make too much – I won’t get anything
Family income is definitely a factor when it comes to handing out financial aid. The best kind of financial aid is always the “free” kind – the scholarships and grants that are given freely with no expectation of being paid back later. And often it’s this “free” money that has a “financial need” component to it. Many scholarship and grant providers want to give their awards to students who show some kind of financial need, and when a student’s/family’s income is high, usually the financial need is low.
Not all scholarships and grants are need-based, however. If your student is motivated, they can seek out scholarship and grant opportunities that are based on skills, abilities and interests, grades, musical, athletic or dramatic talent, essay-writing, or a number of other merit-based achievements. The key is looking for them. You know the saying, “you can’t win if you don’t play”? That same philosophy applies to scholarship competitions. Investing some time online searching for “scholarships for high school juniors” or “scholarships for journalism majors” or, if writing essays isn’t a strength for your student, “no essay scholarships” might provide some avenues of funding.
Myth #2: My parents aren’t helping me pay for college so I can’t get financial aid.
Students who are financially independent from their parents can often access additional student loan funds, but a parent’s unwillingness to pay for college doesn’t make you financially independent from them.
The primary circumstances that cause a student to be financially independent are:
- Orphan/ward of court/foster care/emancipated minor/legal guardianship/homeless status
- Veteran of the Armed Forces of the United States
- Graduate or professional student
- Student’s marriage
- Student provides support to dependents
Detailed information about these circumstances can be found on the federal Department of Education website https://studentaid.ed.gov/sa/fafsa/filling-out/dependency
If a student has no contact with their parents, or if the student doesn’t reside with their parents because of an abusive or neglectful situation, the student can approach the financial aid office at their college for special instructions on how to complete the parent section of the FAFSA or to determine if there’s a need for a dependency override.
GEAR UP Iowa is proud to take part in celebrating #NationalGEARUPWeek, recognizing the work done in schools partnering teachers, students and families with GEAR UP facilitators to create a college-going culture in schools not only in Iowa, but across the country.
GEAR UP Iowa’s latest group of students started in 12 partner districts two years ago, following 7th graders, and expanded this year to include 7,000 9th graders at high schools throughout the state.
Students and their families receive a variety of services aimed at preparing them academically, financially and inspirationally to enroll and succeed in college. Upon enrollment in a college, GEAR UP Iowa students will receive a modest scholarship for up to four years.
GEAR UP Iowa Alum and St. Ambrose University student Taylor Hills is featured in a video created by Iowa College Aid and GEAR UP Iowa that shows the impact that these programs have in schools and communities.
Hills graduated with the most recent group of GEAR UP Iowa students from Columbus Junction High school, after GEAR UP Iowa worked with her and the other students in Columbus Junction starting in 7th grade. In the video, she discusses the impact GEAR UP Iowa had on their dedication to completing high school, including being the first to graduate 100% of seniors in Columbus Junction’s history, and the impact that the program continues to have on her life as a college student.
With college costs rising faster than increases on household income, more and more students have student loans to help fund their education. Often they don’t fully understand all of the terms and fail to track the amounts they borrow. One of the best ways you can stay on top of this process and set yourself up for an easier repayment process, is to limit the amount of student loan debt you accrue. Taking out the smallest amount of money possible in loans will pay off in the long run.
Follow these tips to ensure that you limit the amount of student loan debt you accrue while still in school.
Borrow only the amount you need.
Many borrowers make the mistake of taking out more loans than necessary. To avoid doing this, create a budget to determine how much loan money you will need and avoid using loan money to pay for unnecessary expenses, such as trips to the movie theater or expensive dinners.
Consider a part-time job.
If your academic schedule allows, consider finding a part-time job on campus to help supplement the cost of unexpected expenses. Be sure to check with your financial aid office to see if you qualify for work study, which will give you the opportunity to work on campus.
Consider paying your loan interest while still in school.
If you start making interest payments on your student loans while you are still in college, you will reduce the total amount you’ll have to repay. Interest payments are usually manageable and by paying off interest as you go keep outstanding interest from capitalizing on any of your balances. Allowing interest to capitalize increases your loan balance essentially requiring you to pay interest on the interest that has been accrued!
Apply for scholarships.
Scholarships can pay for portions, and at times all of your education during an academic year, but you must apply! You can find scholarships that specific to your school or department by talking to a representative from your school’s financial aid office or your department chair. In addition, the following sites are just a few places you can search for scholarships.
Choose a school that fits into the family budget.
Review the financial aid packages from the colleges where you applied and consider how much you would need to borrow from each. Keep the end in mind and select a college where your loan debt can be kept as a reasonable level to your future income potential.
For students getting ready to go to college, GPA is an important three-letter abbreviation that can help determine success in finding the right school. But three other letters are about to become equally important in helping students and families find money to pay for that education.
PPY, or “prior-prior year” refers to changes in the Free Application for Federal Student Aid (FAFSA) that will go into effect starting with the 2017-18 FAFSA application, available this fall, that will make it easier for families to file for financial aid.
The most important tool for students looking to find money to help fund their education after high school, a completed FAFSA helps schools create financial aid packages, states determine grant eligibility and qualify students for federal Pell and other grants.
The FAFSA determines financial need for aid based on looking at the tax return submitted by the family, or student if they are funding their own education. In the past, applicants had to wait until they or their family had completed tax returns for the previous year. If a student was completing the FAFSA for the 2016-17 school year, for example, they would be forced to wait for their 2015 tax return to be completed. Considering that many financial aid deadlines hit around May 1, the window of opportunity for getting in tax returns was very small, especially if a family waited until the April 15 tax filing deadline.
In 2015, however, President Obama signed changes to the FAFSA into law that help families apply in a more timely manner starting with the 2017-18 school year. The new FAFSA guidelines not only extend the application filing dates (starting October 1 as of this year), but allows families to use an older tax return, their prior-prior year return.
So in the case of the 2017-18 FAFSA, families can use their PPY return from 2015, as opposed to waiting to complete their 2016 tax return. By allowing this flexibility in which tax returns are needed for the FAFSA, families and students will no longer need to wait to complete the FAFSA as early as possible. And by filing the FAFSA early, students will get information about their financial aid opportunities earlier in the college application process, as well as make themselves eligible for state grants and scholarships well before deadline dates.
As with any changes, PPY might seem intimidating until families better understand the convenience it brings to the FAFSA completion process. Many organizations have created FAFSA toolkits to help navigate the changes in this year’s FAFSA. Both NACAC (National Association for College Admission Counseling) and NASFAA (National Association of Student Financial Aid Administrators) have created FAFSA toolkits aimed specifically at understanding the impact of PPY on this year’s application.
For students that will be looking for financial aid in 2017-18, these sites offer vital tips to navigating the changes in the FAFSA. But all families can benefit from learning how three simple letters will make obtaining college financial aid easier for their students when the time comes.
Planning can make all the difference between calm and panic. That certainly holds true for putting together a plan for getting to college. We’ve already discussed the easy ways that freshmen and sophomores can be set on the path for college.
Come junior year, it’s time for the rubber to hit the road. With only two years before high school graduation, students and families can put their college plan into action early enough to not find themselves scrambling come senior year. Iowa College Aid’s “Your Course to College” offers tips that will help families in their junior and senior years of high school execute their college plans to perfection.
Here are a few things to get on the calendar for junior year to help with college planning:
- Now is the time to really focus on your career and college research. Determine which colleges offer programs that interest you.
- Take the PSAT in the fall of your junior year to be considered for a National Merit Scholarship. Plus, it’s good practice for the SAT!
- Attend college fairs and go on college visits. Call ahead to schedule appointments with financial aid and admissions offices.
- Take the SAT or ACT in the spring and have the official scores sent to the schools that interest you. Download a free ACT preparation booklet from www.act.org. Find free official test prep for the SAT through the College Board and Khan Academy at www.khanacademy.org/sat.
- Ask for letters of recommendation. Identify teachers, counselors, employers or other adults who can attest to your academic achievement and abilities and ask that they write letters of recommendation for scholarship applications or admissions applications, if needed.
For more tips and advice on planning for, applying to and succeeding in your education after high school, check out “Your Course to College.” Iowa College Aid also publishes a guide for families looking for more information on financially planning for their student’s education. “Planning for Our Futures” is produced in conjunction with Iowa Insurance Division, Treasurer of State and the Iowa Department of Education. Both publications are free to families.