Are you ready for a shocker? In the last 25 years, the costs of private college have shot up, rising twice as fast as household income! That's according to Daniel Luzer, in his article, "The Problem with Financial Aid." Back in 1988, an average family spent 22 percent of their annual income on college-related costs; today, that same family would spend upwards of 50 percent of its annual income on college, according to Luzer.
And public institutions, says CNN Money, raised tuition and fees 4.8 percent for the 2012-13 academic year. The average student – not including those who got financial aid benefits – paid 3.8 percent more. That brings the average overall outlay for students – including fees for books, cafeteria expenses, tuition, dorm and other college-related costs – to a whopping $22,261 for the year.
With college costs exploding like this, most would agree that it's at least important, if not imperative, for incoming (and currently enrolled) students to understand the many intricacies of financial aid programs. These programs can go a long way toward lightening the burden on students and their families. You're no doubt wondering how to make sense of – and turn to your advantage – the financial aid programs out there. Well, let's take a look at some ways to make the most of financial aid while avoiding pitfalls that could cost you a lot more money in the long run. We begin with the basics, right now.
Problem: I Have No Idea What I'm Doing! Help Me!
First of all: breathe. Second of all: get ahold of yourself. Help has arrived!
To begin with, each (and every) year, you'll want to fill out the Free Application for Federal Student Aid as early as February. Be sure to submit a new application each year, even if you don't think you meet all the criteria for financial aid. To get federal, state and institutional aid, students must fill out the FAFSA. Be aware that there may be different student aid deadlines (http://www.fafsa.ed.gov/deadlines.htm) for state, federal and/or college-based programs. That link you just saw is important to you, because depending on your state and the year for which you're applying for aid, it will show you exact dates and last-minute deadlines for your particular circumstances.
Don't overlook the basic eligibility requirements for financial aid. They require that you:
- Are a U.S. resident or eligible non-citizen
- Can demonstrate financial need
- Are enrolled as a regular student in an eligible degree (or certificate) program
- Meet certain general requirements
You'll probably also want to check out FinAid.org. Here you'll find a wealth of information on financial aid topics, both large and small, including a college cost calculator; a financial aid estimation calculator; and descriptions of aid options, such as student loans, private loans, scholarships and other sources like military or tuition payment plans. If you're looking at graduate schools or business schools, don't worry. FinAid has you covered, too.
Problem: Confusing Financial Aid Letters
Once you've submitted your aid application, you can expect to hear back in early to mid-April. But don't think the hard part is over! According to The Daily Free Press, the letters many students receive leave them scratching their heads. Unclear wording and indecipherable terminology can make it difficult or impossible to make out what the financial aid is actually going to be. Most students simply want to know the bottom line. Instead, they – and their equally confused parents – are forced to struggle through dense bureaucratese, irrelevant details and muddled information.
Many financial aid letters don't even provide a single, bottom-line cost figure for families. The result is confusion over how much to take out of savings and income, not to mention in loans, in order to pay the Cost Of Attendance (COA). We recommend and urge you and your family to seek outside assistance – not just university help – to get clarity. FinAid, once again, offers a special section to help you with financial aid award letters. Here you can learn about potential problems, resources, and how to identify the amount awarded, among other topics.
You'll also find an extremely useful glossary tool to guide you through the confusing terminology that may have confronted you in your letter(s). And for further informative and helpful resources on financial aid, head over to Federal Student Aid.
Problem: Know What You're Paying!
In other news, while financial aid – from university, federal and state grants to loans – can increase each year, so can tuition and fees, according to The Daily Trojan. Cynthia Wang, a USC biochemical engineering student, ended up paying more in her sophomore year than she did as a freshman. The problem wasn't her loan amount: that went up. The problem was that her tuition and fees went up even more! Wang wishes the amount of aid were a constant proportion of tuition, to cover the price jumps each year. That way, she could continue to pay the same amount each year. Make sure you understand what you may owe, not just in the first year, but three or four years down the line.
The Bottom Line
Many people are thinking hard about how to help students find the best student aid deals available.
- Kathleen Kingsbury, in a Reuters article, urges students not to give up in their search. She stresses the importance of financial aid and explains why even high-income families should apply.
- Another writer, Tanya Abrams, provides a helpful Q and A about financial aid letters in her New York Times article, "How Final Is a College's Financial Aid Offer?"
- FinAid says that both the Perkins and Subsidized Stafford Loans can be solid bets for students who need low-cost loans. The government will actually pay the interest on both, so long as the student is enrolled in classes more than half-time.
- An article in the University of Texas at El Paso's Prospector, "Financial Aid Problems Plague Students", urges students to stay up-to-date with the prerequisites for keeping their financial aid. These criteria include minimum GPA and the number of hours they must study each year, among others. The article also urges students not to wait until the last minute to check on their status.
A number of institutions are also looking at the overall debt students accrue while in school. Many graduates find these loans crippling as they enter the workforce. According to The Project on Student Debt, two thirds of the 2011 graduating senior class was in debt – and serious debt, too. We're talking about $26,600 for the average student!
What does all of this mean for you? In three words: knowledge is power. Know everything you can about how financial aid works. That will give you a chance to sidestep some of the pitfalls in the system, save yourself a chunk of money, and focus on what really matters: namely, your education!