College financing has changed since most of today’s parents went to school. The average college graduate now gets more than a sheepskin when he/she walks up to the podium; the proud degree-holder walks back to their seat tucking more than $27,000 in student loan debt under their arm. Many people say it’s worth it. Education debt is an investment, they say. Others wonder if college financing needs to be approached more cautiously, in light of the dismal job prospects that await many of these debt-laden grads. Still others say it depends. If borrowing heavily means the difference between a less prestigious institution and a top school whose degrees have a reputation for opening doors for its graduates, maybe it’s justified. What’s clear is that today’s students and their parents must think strategically about college. Here are some dos and don’ts that may help you. —Robin White Goode
DO consider borrowing conservatively. Set a limit on the amount of money you’ll borrow. Research schools whose graduates incur low debt and those that have eliminated loans from their financial aid packages.
DO speak candidly to your college-bound youngsters about the importance of repaying their loans, how borrowing will affect their take-home pay, and how long it will take to pay back those loans. Sheila Hicks, the Director of Financial Aid at Riverdale Country School, says every $10,000 of borrowing equals roughly a $100 a month repayment. “Paying back $100 to $200 a month is manageable,” says Hicks, “but $300 to $400 a month would affect lifestyle choices.”
DO explore alternatives to borrowing. Experts recommend starting the college search process in your child’s junior year of high school. That’s when you or your child should register with reputable online scholarship databases such as FastWeb or Scholarship Search on the College Board’s website. It’s tedious and time-consuming to fill out the forms, but spread out over the junior and senior years of high school, one to two hours a week, the task should be manageable. Be sure to pay attention to deadlines. Also, ask about scholarships or grants at the school your child hopes to attend. If you’re awarded a private scholarship, Hicks advises that you ask schools you’re interested in how they allocate such awards. Some schools will reduce the aid they’ve awarded you. You may need to ask them to use the scholarship to reduce or replace loans, not college grants. Look into state aid as well on your state’s website. Your child should ask his/her guidance counselor about grants and scholarships for which he/she might be eligible. Consider lower cost state schools, community college for the first two years, or attending college in Canada, (where tuition is reportedly about half as much as at a private liberal arts school in the U.S.).
DO avoid for-profit or proprietary colleges. Reports show that students who attend for-profit colleges end up saddled with more debt than students who attend private nonprofit schools or public colleges, regardless of family income. According to a report by the Education Trust, Subprime Opportunity, these institutions provide their students “little more than crippling debt,” yet they aggressively recruit low-income minority students. These schools have come under increased scrutiny lately, and there doesn’t seem to be any reason to consider attending one.
DO appeal a school’s financial aid award politely. State why this is your child’s school of first choice and why your situation warrants particular consideration.
DON’T borrow without looking at the big picture. Your child should educate himself/herself about every aspect of their loan and consider it part of their college education: Is the loan subsidized (which means the government pays part of the interest; financial need must be demonstrated to obtain a subsidized loan) or unsubsidized? When will he/she need to start repayment? What interest rate is being charged? What happens if a payment is missed? Two payments? What will he/she do if they don’t get a job right after graduation? Explore deferment and forbearance options, but be aware that interest will still accrue. He/she should also know about loan forgiveness programs and explore the tax implications of their loan.
DON’T fill out the FAFSA, or Free Application for Federal Student Aid, without consulting “Common Errors on Financial Aid Applications” at FinAid.org. The FAFSA is not intimidating, but it is lengthy and somewhat tedious. However, for your student to be considered for financial aid it must be filled out. Submit it even if you think you’re ineligible for aid, because the FAFSA is also sometimes used for scholarship consideration. Note: the “you” on the FAFSA is always the student.
DON’T neglect helpful resources, which are too numerous to list here. Get started with these: FinAid.org, FastWeb.com, the College Board, the Federal Student Aid site, UNCF, and the Hispanic Scholarship Fund. Be sure to attend local financial aid workshops offered through churches, community centers, schools, or other outlets. Your local library is another great resource. Ask the librarian about books on financial aid, college financing, scholarships, and more.
DON’T forget about cooperative education, which isn’t written about much but because of persistent unemployment may see a comeback. Students in college co-op programs work in the field of their major while they’re in school, either concurrently or by alternating semesters of work and study. They earn money and develop relationships with employers, many of whom hire them after they graduate. Interested? Consult the Directory of College Cooperative Education Programs at your local library, or ask your student’s guidance counselor if he or she has a copy.
DON’T forget to file the CSS Profile financial aid form, which is found at the College Board site. Certain private schools require this form (check at the site to see if your school does). The form is long and asks more detailed questions than the FAFSA does. It also needs to be submitted in the fall; the FAFSA is submitted Jan. 1 or as close to Jan. 1 as possible. You’ll need a credit card to submit the Profile, and you’ll be charged a fee for each school or scholarship program selected.
How are you planning to meet your children’s college expenses? If you’re a student, what strategies are you using? Feel free to comment below.