Here’s a great infographic that applies to the recent student loan news. The only “myth” that I might question is #5-Student Loans aren’t worth it. While the statistics show that college graduates do earn enough more over their lifetime than high school graduates, you have to be savvy about the amount of money you borrow and your ability to repay it.
Created by: Online Graduate Programs
If you have kids, then chances are you’ve already thought about college affordability and how or if you’ll be able meet the expenses associated with higher education.
But you shouldn’t allow the worry of college costs to consume your life. There are many practical and successful ways to pay for college (without drowning in debt) no matter what your income level may be.
Many families labor financially to make ends meet and they feel like it will be impossible for their children to attend a 4-year university. This simply isn’t the case. I’m not saying it’s going to be easy, but there are ways to send your children to college on just about any level of income.
Anyone can save money for college; all you need is to remove the excuses from your life. Starting with financial basics, the best way to begin saving for college is to pay off all your debt (or at least live within your means and be actively involved in a debt payoff plan). Sound too difficult you say? That sounds like an excuse to me.
Living with debilitating debt and allowing bills to circle your life like a vulture is a surefire way to live paycheck to paycheck and never have the available funds to save for college. What I’m trying to say is this: paying for college isn’t some magical happenstance that you uncover on some random day. It’s going to take hard work, and in some cases, a change in your financial landscape.
Regardless of your current income level, you have the ability to save for your children’s college fund. You might have to trim your expenses, adjust your spending habits, and redirect your lifestyle in order to free up money for the college fund. But if you want to send your kids to college without financing 100% of their education with borrowed money, then you’ll have to decide what’s more important.
Think of it like this; if you can scrounge up even $100 a month to save for your child’s college when they’re born, you’ll end up with $21,600 (and that’s without interest or anything). Sure, that might not pay for 4 years of tuition, room, and board, but it’s definitely a great start.
A 529 Plan is a tax advantaged college savings account designed to encourage families of any income level to save for their children’s education. 529 Plans are “qualified tuition plans” sponsored by states, state agencies, and educational institutions and are authorized by section 529 of the IRS (hence the name 529 Plan).
The encouragement to save for college within a 529 Plan comes in two forms: the ability to save money free from Federal taxes and the ability to receive a deduction on State taxes. One benefit to a 529 Plan is that anyone, upon creation of the account, can be named the account’s beneficiary, regardless of age.
The 529 Plan is a lot like a Roth IRA for your college savings fund. The savings will grow tax-deferred and any withdrawal is tax-free as long as you use the money withdrawn for qualifying educational expenses.
A Coverdell Educational Savings Account (ESA) is another tax advantaged college savings account which is meant to inspire families to save for future educational expenses. The difference between an ESA and a 592 Plan is that an ESA’s beneficiary must be a student under the age of 18.
An ESA also has a maximum annual contribution limit of $2000 and the owner of the account has the freedom to choose what types of securities they would like to invest in (stocks, bonds, ETFs, mutual funds, etc.).
With both types of college savings accounts, you’ll incur a hefty 10% tax if you withdraw any amount of money from either account and use it for non-education related expenses.
No matter how much or how little you’re able to save for your child’s college education, you’ll always want to be aware of and informed about college grants and scholarships. After all, this is free money we’re talking about.
Scholarships are offered by high schools, colleges, and other organizations usually recognizing some sort of educational, athletic, or humanitarian achievement. Scholarships vary by amount and length. Some are one-time gifts and others are recurring payments made as long as grades and other collegiate performances are maintained.
Information about college scholarships is usually available from your high school, your hometown city hall, and the university you wish to attend. You can also search for scholarships on the web. Some of these scholarships may be smaller than a say a university’s alumni scholarship, but $500 here and $1000 there really starts to add up.
Grants are another “free money” option. The government offers need-based grants to families with a low income. Other organizations are free to offer grants to students that show academic promise or that meet other requirements.
There are numerous kinds of financial aid and student loan programs available, but these loans should be your last resort when it comes to financing college. I’m not saying student loans are bad, but financially responsible parents won’t rely solely on borrowed money to fund their children’s college. As I mentioned earlier, if you save even $100 a month, you can drastically cut the amount of money you need to borrow to send your child to college.
There are Federal Stafford Loans, Perkins Loans, Plus Loans, and numerous other student loans available from private institutions. If you qualify, you can apply for subsidized student loans that are basically interest free until you graduate and begin loan repayment. FAFSA is your Free Application for Federal Student Aid.
Jamie Scott from CreditDonkey also reminds you that while “student credit cards are a convenient option to help students pay for short-term small expenses such as groceries,” there are other options available for long-term larger expenses such as tuition.
The bottom line is that you’ll probably use two or three different sources to fund your child’s college expenses. Don’t give up just because of your low income and don’t think that your high salary will always be there for you. No matter where your income level is at, research, preparation, and responsibility will go a long way when it comes to saving and paying for college.
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Today’s guest post is from Jamie Scott, social media advocate with CreditDonkey. Jamie helps parents and students prepare for college by evaluating student credit offers. As a parent herself, she knows all too well the concerns most families have about responsible credit usage.
In just under a month, it will be time to file your Free Application For Student Aid (FAFSA) for the 2011-12 school year. The FAFSA is the key to accessing your Federal Student Aid – including grants, work-study and Federal loans – and other valuable financial assistance. Whether or not you think your family will qualify, you should always apply for aid; you might be surprised at the results!
To help you make sure that you do everything necessary to get your college aid, below is a list of tips for preparing the FAFSA for submission. These are just the basics – there’s a much more detailed checklist at the bottom of this post.
If you have any questions, please feel free to reply in the comments and we will do our best to help you out!
Where to File
Starting January 1, 2011, the 2011-2012 FAFSA can filed online or downloaded at http://www.fafsa.gov. Some high schools may also have printed FAFSA forms available.
1. Determine Who Will File: You or Your Student?
The FAFSA is filed in the name of the student – the one who will be receiving the financial aid. You may submit the FAFSA on behalf of your student.
Regardless of who does the actual filing of the FAFSA, the student’s signature is always required, and if the student is considered a dependent, at least one parent must also sign.
2. Determine Dependency Status Ahead of Time
Every student who applies for financial aid with the FAFSA will either be considered a dependent or an independent student. There is a special worksheet created to determine dependency status.
To access the worksheet on the FAFSA website, click here.
NOTE: The current version is for the 2010-11 school year, but there are not likely to be major changes for 2011-12.
3. File Your Tax Returns Early
In order to complete the FAFSA fully, parents of dependent students and students who worked during the past year need to have their 2010 tax return information ready.
4. Gather Documents Before Starting
Filing the FAFSA will be much easier if you have everything together before starting. For the 2011-2012 school year, you’ll need the following documents:
5. Use the FAFSA on the Web Worksheet
The FAFSA on the Web Worksheet is a convenient way to organize all of the required information you’ll need to fill out the FAFSA. To access a PDF version of this worksheet, click here. (Note that the 2011-2012 worksheet isn’t available yet)
6. Apply for FAFSA PIN Now
In order to file your FAFSA form electronically online, you will need to sign it. This can be done electronically with a PIN, or you can print, sign, and mail in the signature page which will be provided to you when you complete the FAFSA. Both students and parents need to sign the FAFSA.
See the Department of Education’s FAFSA PIN website for more information.
Questions?
If you start preparing now, filling out your FAFSA on January 1st will be a breeze! If you have any questions or need additional guidance, feel free to reply in the comments below. We look forward to helping you!
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This guest post is contributed by Jeff Sheely, who blogs about financial aid and education financing at Overture Student Loan Marketplace, where students and parents can get information or compare private student loans to make more informed decisions about how to pay for college.
He’s happy to answer your questions in the comments, or you can connect with him on Twitter or Facebook.
The college tuition system has been turned upside down now that the Student Aid and Fiscal Responsibility Act (SAFRA) is law. The Student Aid and Fisc-huh?!?
SAFRA is legislation President Obama tacked on to his infamous health care reform bill.
“The White House succeeded in not only getting the health care bill passed, but in making a huge change to the college loan system,” says Eric Yaverbaum, education expert and author of Life’s Little College Admissions Insights. “It’s gone largely unnoticed because it’s seemingly unrelated to the blockbuster changes in the health care industry.”
There’s been some controversy surrounding the issue of combining student aid reform with the seemingly unrelated matter of health care reform. But political views aside, let’s see how SAFRA affects students:
No. 1: You’ll get loans directly from the government — without a middleman.
While some schools have participated in the Federal Direct Loan Program since its inception in the early ’90s, SAFRA requires that all federal student loans now be originated through the U.S. Department of Education. This means funds come directly from the federal government, which provides the loans at a low interest rate.
“It’s so advantageous to students,” says Yaverbaum. “My daughter is about to enter her freshman year, and as a parent I couldn’t be more excited about it. College students are really going to benefit. Paying back college loans kills kids forever. Now it doesn’t have to be such an awful experience.”
Your credit score and employment status are not factored into your application for a direct loan … unless you have extreme adverse credit (say, your car got repossessed or you’re more than 90 days past due on that Urban Outfitters account). If you get denied, you can appeal or get a qualified co-signer.
No matter where you are in the borrowing process, visit StudentLoans.gov to find out if you qualify for one of the four types of Federal Direct Loans:
1. Federal Direct Subsidized Stafford Loans are based on financial need. The government pays the loan interest until you’re out of school.
2. Federal Direct Unsubsidized Stafford Loans are not need-based, and students are required to pay all interest charges.
3. Federal Direct Parent PLUS Loans (“PLUS” stands for “Parent Loans for Undergraduate Students”) allow parents to borrow money to help pay for their child’s education.
4. Federal Direct Graduate PLUS Loans offer the same terms as Parent PLUS for graduate and professional-degree students.
No. 2: You can consolidate loans you already have.
Federally guaranteed student loans will no longer be made by private lending institutions through what many of you already know as the Federal Family Education Loan (FFEL) Program.
What to do if you have an existing FFEL loan? For a one-year stretch — from July 1, 2010 to July 1, 2011 — current students who have FFEL loans can roll those into the Direct Loan program. The benefit is that you’ll only have to deal with a single lender (the Direct Loan Servicing Center) which means paying one monthly payment for all loans. Plus, your minimum monthly payment on a consolidated loan may be lower than the combined payments for FFEL loans.
No. 3: You’ll pay back less per month (and overall) and be done in fewer years.
Carrie Meyer, a rising senior at Ohio State University, has had to rely on three loans to cover her college tuition over the years: federal subsidized, federal unsubsidized and a personal loan. Meyer, a hospitality management student who currently works part time, still worries about paying off her loans after graduation: “With what I want to do, you don’t start out getting a big salary.”
Direct Loan borrowers can choose from several friendly payment plans, depending on needs — and you can switch to a different repayment plan if your situation changes. Beginning in 2014, the Income Based Repayment option will cap monthly loan payments at 10 percent of income and forgive remaining balances after 20 years of repayment. Sound like a lot? Actually, this is a major improvement from the current terms of capping repayments at 15 percent and 25 years, respectively.
No. 4: You could save big-time on loan payments if you go into public service.
Public Service Loan Forgiveness provides incentive for students to enter into full-time public service employment. The program forgives the remaining balance of a Direct Loan after a borrower has completed 120 monthly payments (that’s 10 years) while employed full time in public service. This includes government jobs, military service, safety professions, law enforcement, health care, social work, legal advocacy and some teaching positions.
No. 5: Maximum Pell Grant amounts will increase with inflation.
While SAFRA does not change the process for applying for federal grants, it does increase the amount of money awarded through the ever-popular Pell Grant program, which provides financial aid to low-income undergraduate students. For the 2009 to 2010 school year, the maximum Pell Grant was $5,350. The max will be upped to $5,550 for 2010 to 2011 and will gradually increase based on inflation costs beginning in 2013.
Students interested in applying for aid should complete a Free Application for Federal Student Aid at Fafsa.ed.gov or call 1-800-4-FED-AID. Keep in mind that this is not a one-time thing — students who want to be considered need to apply for aid for every school year, so it’s important to stay on top of application procedures.
A recent report released by the College Board found that millions in financial aid are left untouched by community college students. In the 2007 to 2008 academic year, 58 percent of Pell Grant-eligible students who attended community colleges applied for federal financial aid, compared with 77 percent of eligible students at four-year public institutions.
No. 6: Community colleges and minority schools will get big bucks for improvements.
Says College Board President Gaston Caperton: “Community colleges are a critical part of the education system, serving nearly half of all undergraduates in the United States.” The terms of SAFRA reflect this sentiment, as $2 billion is being committed to improving educational programs and updating facilities at community colleges. In addition, SAFRA has earmarked $2.55 billion to be invested in historically black and minority institutions.
Talk It up!
What do you think about SAFRA and its impact on the college student aid system?
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This article is by the editors at The Real College Guide. This article is made available to Parents Countdown to College Coach through a partnership with The Real College Guide.
Last week, while participating in a #CampusChat on Twitter a question was asked by a parent about college financial aid. Since none of us participating were sure of the correct answer, I wanted to provide the parent with the correct answer and get some clarification myself on the subject.
Question: If you check the box that says, “no financial aid needed” on the college application, does it improve your chances for acceptance?
I immediately sought the answer from the two admissions representatives I have connections with on Twitter: Chip Timmons (@ChipTimmons) of Wabash College and Gil Rogers (@GilRogers) of the University of New Haven.
Chip responded by saying, “If the student is on the margin it may help provided they are prepared academically (i.e demanding curriculum, strong in high school). My guess is more schools are going to take that into consideration in the coming years as it gets tougher to fill classes”.
Gil responded by saying, “Not at the University of New Haven. With that said, at some schools it may if the student is on the wait list and the school is trying to control discounting.”
If you weigh both these responses, it appears that it’s not a determining factor unless other considerations are in place. The best advice would be to check with the colleges your teen is interested in and ask them if they use it as a factor. However, I wouldn’t plan on it being the card in your pocket to assure acceptance. And honestly, if you have a college-bound teen with an impressive high school record, you should make an attempt to get some merit aid; even if you can afford the entire tuition. It just makes sense to fill out the FAFSA and take your shot at grabbing a piece of the financial aid pie.
If you’re an admissions officer or college admissions expert, please leave your comments here and share your experience with us. We value your input.
Today I will be reviewing Lynn O’Shaughnessy’s new book: Shrinking the Cost of College–152 ways to cut the cost of a bachelors degree.
Lynn O’Shaughnessy, is an author, a college blogger and speaker. She writes about college strategies for TheCollegeSolutionBlog and CBSMoneyWatch. She gives presentations about college strategies for schools, companies and financial advisory firms. Lynn also wrote The College Solution, which is an Amazon.com bestseller.
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Using facts and figures, Lynn explains clearly and simply where college money comes from and how to maximize your efforts to get the most money for a college education.
In the introduction of her book, Lynn states:
Billions of dollars of aid are available to students who attend college. About two out of three full-time college students receive grants, otherwise known as scholarships, to attend school. At private colleges, a whopping 82% receive scholarships…Most people look in the wrong place for help when they begin contemplating the looming college tab.
Her book systematically explains how the system works and how every parent can arm their arsenal of knowledge to help find and maximize the money that is out there. At the end of each chapter is a “To Do List” to point you in the right direction and help you gather all the information necessary to make the best financial decisions. Each chapter provides tips and “bottom line” information making it easy to apply and carry out each step in the process.
Lynn explains state grants, government grants, and private college scholarships. Her explanation of financial aid and how it works makes it easy to understand the most complicated of formulas. She explains where to find the data and how to analyze it to find the colleges that will provide the maximum financial aid to your college-bound teen. As a parent, this one tip alone will make the college application process less stressful and help to ease the college sticker price fears.
And finally, she explains the financial aid award letter and what to do when the letter arrives; walking you through how to analyze the award and how to handle an appeal for more money.
Here are just 10 tips from the book that will help you shrink the cost of college:
Every parent should grab a copy of this Ebook to add to their arsenal of college information. You can also chat with Lynn live on Twitter during an upcoming #CollegeChat June 1 at 6PM PST.
As I stated last week, I love to find scholarships that DON’T require an essay. This week’s scholarship is sponsored by College Prowler.com and it’s a NO ESSAY scholarship. That’s right! All you have to do to be entered in the MONTHLY drawing is complete a short survey on their website and be a current college student or planning to enroll in college within the next 12 months.
The monthly contest begins on the first day of the month, and ends on the last day of every month. You may have one entry per month. It’s SUPER EASY and ANYONE CAN WIN!
Send your college-bound teen to CollegeProwler.com each month for a chance to win a $2000 scholarship. You might as well leverage ALL your opportunities for that FREE money!
College isn’t cheap. My College Guide has been saying that for years – 20 years to be exact! But don’t let a tiny matter like cost take your college bound hopeful off the college track! You should know that, when it comes to paying for college: you’ve got options.
Federal Loans – The Free Application for Federal Student Aid, or FAFSA, could send free college aid your family’s way! No matter what your financial situation may be, you and your teen should fill out the form, online or mail-in. Circumstances change – and colleges often require a completed FAFSA in order to consider your son or daughter for college-specific loans and scholarships!
Work — Study Programs — Sometimes nicknamed “self help aid” work-study programs are often provided by the college your teen actually wants to attend. There is a Federal Work-Study Program and state programs as well. It’s one way that your teen can help pay their way through college – and gain a little life experience in the process.
Grants and Scholarships — Simply applying to college will make your child eligible for some scholarships sponsored through the school. Of course, many scholarships are merit based. But, even if your college bound teen isn’t at the top of their class and the last sport your child played was tennis on the Wii – with the right scholarship or grant, lack of athletic or academic achievement may not matter. There are scholarships and grants out there to fit every student: no kidding. Your son or daughter can find free money to match their ethnicity, intended college major, religion, SAT scores, hobbies, and then some. Many colleges have their own specific scholarships and/or grants that cover a range of abilities and majors. To get started, have your teen sit down with their high school guidance counselor or surf the web for free money that fits!
Student Loans – There are various loan options: state, federal, and even loans from your child’s choice college. Loans do need to be paid back and there will be interest tacked on but repayments are very often deferred — at least until your child completes their college career. It’s good to know that when all else fails – there is still an option!
My College Guide has provided free college info with a 100+ page annual magazine for high achieving high school sophomores for over twenty years. We are rapidly expanding online – find us on Facebook and Twitter and say “hello!“
Every parent frets, stresses and loses sleep over financing their college-bound teen’s college education. The good news is there is help available out there to ease your mind and get you on the right track to preparing for that day when your teen heads off to college. Here’s a list of my Top 10 College Money sites:
1. Reduce My College Costs–Marc Hill, CCPS, RFC® and founder of Reduce My College Costs, LLC. is both a financial planner and a parent, who know what you are going through. That’s why he created his firm to be a little different. It is not a scholarship search firm and not a student loan lender. He is well-versed in the financial aid process, but he knows not everyone is eligible for financial aid. So he takes a broader approach-identifying a variety of solutions that will make college more affordable for people at all income and asset levels.
2. FinAid–gives an overview of all types of college funding from scholarships, to loans, to savings, to military aid, to loans with links and information on each of them.
3, Saving for College–A top notch site explaining in great detail all the in and outs of college savings with calculators and tax information.
4. UPromise–A college savings service that harnesses the purchasing power of parents, extended family, family, and students to make it easier to pay for college. Members direct their spending to Upromise partners-including more than 600 online stores, 8,000+ restaurants, thousands of grocery and drugstore items-and earn money for college.
5. CollegeAnswer–Sallie Mae’s money management site gives an overview on college financing focusing on loans. The site provides a great School Affordability Analyzer.
6. CNN Money/College–A great site for the latest college financing news, calculators and how to maximize your financial aid.
7. MSN Money/College–A guide to saving for college with The Basics, Fast Answers and a message board.
8. CollegeBoard–The College Board’s EFC calculator which will help you determine your Expected Family Contribution BEFORE your teen starts applying to colleges.
9. Money Management 101–A blog created to help parents and students learn about money management.
10. StudentAid–A site for free information from the U.S. Department of Education and the home of the FAFSA4caster.
This week, parents and college-bound teens can attend College Week Live’s FREE virtual college fair online. On March 24-25 from 10AM-10PM you can:
If your schedule doesn’t permit you to attend, you can still log on and view the archived videos at your convenience. Make sure you and your student sign up and mark your calendars for two days of comprehensive college information gathering virtual events.