It’s no news that college is an incredibly expensive endeavor. Many students end up with tens of thousands of dollars in debt when they graduate – a debt they have to start paying back almost immediately after entering the workforce.
Many families realize that college costs are exorbitant, but there’s often no sense of urgency to start saving and strategizing for this future expense. The College Funding Coach is on a mission to educate parents as early as possible on strategies to save and pay for college without breaking the bank.
The good news is that you still have some options if you’re late to the game!
Here are some of our favorite tips to ease this financial burden for those who have the luxury of time AND those who do not:
1. Start Saving As Early As Possible
So many parents are blindsided by college costs when the time to pay actually hits and wished they would have prepared much earlier.
Research the best combination of savings vehicles for college based on your family’s situation and priorities. Many families find that opening a 529 Savings Plan for their kids is a good start. Even depositing a paltry amount each month and asking family & friends to contribute to it can make a huge difference in the future.
Many families and even financial advisors believe the 529 Savings Plan is a silver bullet–a magic recipe to pay for college. It is a great tool, but it is NOT a comprehensive college savings strategy that accounts for retirement and future market volatility.
So, your job is to learn as much about college savings as possible. Use the internet. Join Facebook groups. Seek out financial experts who understand the intersection between comprehensive financial planning and the nuances of the college-funding industry.
Creating a plan, whether you do it yourself or establish one with a financial advisor who understands college funding, is crucial to financial flexibility and mitigates emotional trauma in the future.
2. Learn How the Financial Aid System Works
Need-Based Aid
Filling out and filing your Free Application For Federal Student Aid (FAFSA) is one of the best (and easiest) ways to get extra funds for college. Completing the FAFSA determines how much federal aid a student qualifies for, whether that’s subsidized or unsubsidized student loans, as well as federal scholarships and grants that don’t need to be repaid.
Many families disregard the FAFSA because they don’t think they’ll qualify for any aid. This is a huge mistake, as even the wealthiest families will qualify for Direct Unsubsidized Loans which are nearly always better than private student loans because of their fixed interest rate and flexible repayment plans.
Other reasons you should fill out the FAFSA even if you won’t qualify for aid:
– Some colleges and private scholarship organizations actually require you to fill it out to qualify for their merit aid packages
– If you need to appeal/negotiate for more aid, it’s much easier if the college has all your info on file
– It sets a line in the sand, a baseline for you to determine what colleges are affordable. You will receive your EFC (Expected Family Contribution) after you submit it, which is an estimate of what the federal government/FAFSA-only colleges expect you to pay out-of-pocket. This is not the number you will pay for college; instead, it is used to determine your eligibility for need-based aid (Cost of Attendance – EFC = Need-Based Eligibility)
There is another financial aid form, called the CSS Profile, that many selective schools use to get a more accurate picture of your finances and family situation – fill this out too. These colleges tend to be more flexible with their own institutional aid.
Merit Aid
If you make too much to qualify for any significant amount of need-based aid, you will need to be very strategic about creating your college list. Sure, go ahead and apply to some Ivies or other ultra-selective schools, but you’re going to have to pay an arm and a leg to go there.
Merit aid is what colleges use to entice good students or the types of students they need to round out their incoming class. During your time learning about prospective schools, be on the lookout for colleges that give generous merit aid/tuition discounts.
A good rule of thumb is to apply to colleges where your student will likely be in the top 25% of the incoming class.
There’s tons of data all over the internet, you just have to go out and find it. Here’s a helpful place to start: College Navigator.
It is merit aid that makes private colleges and some out-of-state public universities affordable. Sometimes, they’re more affordable than your in-state public option.
3. Apply for Private Scholarships
Scholarships go toward your college education and do not have to be repaid. You can find a scholarship for nearly every hobby or interest.
Feel free to start with the mainstream private scholarship search engines such as Niche, Fastweb, or Going Merry, but understand that everyone else is using these as well, so the scholarships are incredibly competitive. They will also bombard you with emails.
Go beyond these and search for scholarships through federal and state government search tools, as well as religious, civic groups, local businesses, and community organizations in your area.
Additionally, talk to your school counselors, teachers, parent’s friends & employers. Find the less obvious scholarships. Shoot to find and apply to a set number each week, and try to apply well before the final date. You’ll be surprised at how many scholarships you qualify for.
Bonus Tip: Make sure to continue applying for private scholarships IN college. A whole host of them becomes available.
4. Determine the True Cost of College
It’s hard not to flinch when you examine the sticker prices of colleges. The good news: you will likely not pay the sticker price.
Instead, you want to focus on “net price.” This is the cost of attendance minus all the gift aid you receive (i.e. money you don’t have to pay back).
College costs are super frustrating because you never really know what you’re going to pay out-of-pocket until the financial award letter comes in. This is why it’s so important to calculate your EFC early and get a sense of which schools will meet need and/or give generous merit packages. You can use our calculator here: College Money Report.
You can also use the net price calculators on each school’s website, but some of these do not get updated and may not be that accurate.
Once you calculate your EFC, you will have a rough sense of what colleges expect you to pay and which schools are good financial fits. Start with an annual budget, and then break that out into a monthly financial plan. This will help you choose a school you can actually afford, as well as help you consult additional financial resources before classes begin if you’ll need extra money.
While making your budget, be sure to consider all of your expenses. Include estimates for room and board, food, books, clothes, hobbies, as well as fees for clubs and other activities you’d like to participate in as part of your college life. Use online tools like college cost calculators to get a good idea of the true cost of your college experience.
Some websites advocate a ⅓ strategy where you try and cover your out-of-pocket expenses with ⅓ in savings, ⅓ in cashflow, and ⅓ in loans. Everyone’s situation is different, however. This is not a hard and fast rule.
5. Get a summer job
Taking advantage of your free time during the summer to get a job can lead to some serious cash for college. Try to save a set amount of money each month to go straight toward your college expenses.
Holding a steady job during high school also looks great on your college applications. Plus, the real-life skills you will develop from a steady job will no doubt come in handy as you move through college.
It is a good idea to keep a paid job in college as well if you can manage a job on top of your course workload. This will help out with personal expenses, provide a good way to meet people, and help you keep a schedule. There are plenty of campus jobs available for students, and any extra cash can help you start paying your loans back faster post-graduation.
6. Think Outside the Box
Every family and student has their own path. Try and step outside the bubble of what everyone else is doing – maybe going to a traditional four-year university is not the right move. Conformity may not be worth the thousands in student debt, especially if you don’t graduate or take 5 or 6 years to get your degree.
Consider other alternatives:
– Am I ready for college? Is college even the right move?
– Is a gap year right for me?
– Should I look at trade schools or apprenticeships?
– Community college and transfer?
– College overseas?
– Free tuition colleges? Can I work my way through college?
To delve further into this, read the following post: 14 Ways to Minimize Student Loans.
7. Browse private student loans
If your grants, scholarships, federal direct loans, savings, and cash flow won’t cover as much as you need them to, private student loans are a possible option.
Approach the private student loan industry with great caution and ensure that you understand the terms of the loans.
You can find private student loans from banks, credit unions, and other financial institutions and private lenders. Be sure to only consider loans from reputable lenders and with competitive interest rates, as you won’t need to search very hard to find a predatory loan.
Use a loan comparison tool such as Simple Tuition to get started.
A note on private loans vs Parent PLUS loans: If you have good credit, you may be able to qualify for a better rate on a private loan than on Federal PLUS loans (these are loans that the parents take out in their name up to the cost of attendance).
Final thoughts
While college is expensive, there are ways to make the costs manageable for you and your family. Follow these steps and you’ll be in great shape to understand the true cost of your college experience and reduce the burden of college debt upon graduation.
The College Funding Coach is on a mission to help parents pay for college without destroying their retirement and other financial goals. If you are interested in a discussion with a college funding expert, please feel free to schedule a free consultation:
Author:
Susan Ranford
Editor:
Pat Pacious
Further Reading: