Outside of buying a home, college tuition is one of the most expensive investments a person can make.
But it doesn’t have to be an investment that leaves you in debt for years to come.
There are many ways to pay for college without mortgaging your child’s future and in this post, we’ll cover how to make the most of your student aid and scholarships, as well as how to save on tuition and other expenses.
Let’s jump in!
Start with a budget
Knowing how much you can afford for college is a good starting point. This might include resources already saved, changes in cash flow while your student will be in college or financial help from family. A budget is the key to paying for college without taking on excessive debt.
Start by looking at the total amount of savings you already have set aside.
Think about the changes in cash flow you will be experiencing while your student is in school. For example, you will no longer be paying as much to stock up your cupboards at home, but you might be paying for a meal plan at college or a food “allowance” if they are staying in an apartment.
When you think about family assistance, this can sometimes be a touchy subject. It is very important to be as clear as possible about what family members realistically can do.
Having an open and honest conversation with well-intentioned family members can put you in a much better position.
For example: if Grandpa says he really wants to help put Junior through college his expectations might be different than yours. Grandpa might be thinking of his contribution back when you went to college and expenses have gone up significantly.
It is possible that Grandparents can make commitments that might also put them in a bad situation financially, and nobody wants that. If Grandpa can afford to pitch in $100 per month, great. If another Grandparent can pitch in $500 per semester for books, great.
Every little bit helps and many Grandparents find a tremendous amount of pride in helping their grandchildren through college.
Know your maximum loan exposure
One of the more confusing aspects of college funding is calculating the maximum loan exposure.
As the name implies, this is the maximum amount you can borrow in student loans.
A couple of thoughts:
- In an ideal world, your loan exposure at graduation from college would be zero, but this does not necessarily work for everyone.
- Consider keeping your loan exposure to less than the basic Federal Student loan program which is $27,000*.
- Keep the maximum loan exposure to less than the first year estimated earnings of the graduate. An elementary school teacher with $200,000 in student loans is a recipe for financial challenges.
- Parent Loans are a bad idea and should be avoided if at all possible
*Independent students may be able to borrow a slightly higher amount that is capped at $57,500 in subsidized and unsubsidized loans, but you should still be careful with this.
Every student’s financial situation is different and the best thing to do in order to find out how much you will need for your education is fill out the FAFSA form, which can be found at https://fafsa.ed.gov/spa/fafsa/. This will also help you understand the Expected Family Contribution (EFC) which will soon be changed to Student Aid Index (SAI).
Comparison shopping is good for finding the best deals
If you’re trying to make your child education fund stretch as far as possible, you may be able to find some relief by comparison shopping.
It’s always good to know what other schools offer before committing and doing so could save a ton of money in the process.
This is also a good way to find out which schools have scholarships available and what the requirements are in order to qualify, whether it be grades or test scores.
Once you find a list of potential schools, you can compare them by their acceptance rates, tuition and fees to see which one would be the best option for your child.
Throughout the process, make sure to talk to your child about their thoughts on the schools and include what they feel are the pros and cons of each one.
It’s also important to go into this discussion with an open mind, as some schools that were originally considered top-contenders may ultimately prove to be a bad fit.
Negotiate on the price of college
Negotiating on the price of college is not the same as haggling on a new car purchase or washer and dryer at Costco.
It’s a delicate process that requires equal parts skill and patience.
The first thing you need to know before beginning any negotiation is the college’s “percentage of need met” which you can find here.
This number is how much money your child can receive from their financial aid package, minus any loans or work-study that they have to take out themselves.
The lower this number is, the more you should negotiate with the school on price and scholarships.
While the financial aid office is the place to negotiate on need-based aid, that isn’t the only department where you can appeal based on your financial need.
Enter the admissions department.
The admission office’s job is to convert acceptance letters into enrollment and one of their tools to accomplish this is through merit scholarships.
Merit scholarships are based on your child’s academic achievement, extracurricular activities and future potential.
You can meet with an admissions counselor to talk about these merit-based awards that might not be listed in the standard financial aid package from a school, but will still offset cost of attendance at a certain level.
A word about Private Scholarships
Many parents and students spend a lot of time and energy on Private Scholarships. Unfortunately, there is not as much of a benefit here as one might think. Specifically, if one receives private scholarships, it *might* offset the amount of financial aid one receives and not actually improve the situation.
I still recommend looking into these as it *might* reduce the actual out-of-pocket expense of college, but you need to be aware of how the private scholarships will work in your situation.
Making the final decision
The process of paying for college can be overwhelming at times, but it doesn’t have to be.
Most parents will want to work with their child in the decision-making process and this is a great opportunity for them to ask questions about what they should do when choosing which schools to apply to and how much money they’ll need throughout the process.
Asking these types of questions now can allow you both time to explore your options before deadlines start coming up so that any last-minute changes won’t force students into making rushed decisions on important matters.
Talking about school choices early also allows more time for financial planners or advisers who specialize in student loans, scholarships and other sources of funding to help you and your child figure out how to pay for college.
If you would like to learn more about college planning and your options available, please reach send us an email at info@wallerfc.com and we can get you started with our College Aide Pro software to get expert level insights early in the process.
