College and University Blog
Financial Aid 101: How to Pay for your Education
I’ve got good news and bead news. The bad news is that college costs are rising – about 6% in the last year alone. The good news is that there is more than $134 billion available in financial aid each year.
Most colleges are probably more affordable than you think. About 65% of students attend 4-year schools with annual tuition and fees below $9,000. The average cost to attend a private 4-year college is $22,000 per year, while the average cost to attend a public 4-year college is $5,800 per year. If you choose to attend a public 2-year college, your average yearly cost goes down to $2,300. If you attend as an out-of-state or out-of-district student, expect to pay even more.
About 62% of all full-time college students receive financial aid. The average aid in grants and tax benefits for students attending a 2-year public college is $2,200, a 4-year public college is $3,100, and a 4-year private college is about $9,000.
Most families pay for college through a combination of savings, current income, and borrowing. The amount you will be asked to contribute is based on your family’s income and assets.
The intention of financial aid is to make up the difference between what your family can afford to pay and what college costs. Over half of all college students receive some sort of financial aid. The amount your family is expected to contribute is commonly referred to as the Expected Family Contribution or EFC. This figure is determined by whoever is awarding the aid – usually the federal government or your school.
There are three types of financial aid:
- Grants and Scholarships
Grants and scholarships don’t have to be paid back. Grant aid comes from federal and state governments. Scholarships are usually based on merit.
- Loans
Most financial aid is in the form of loans. THESE MUST BE PAID BACK! Most loans are low-interest loans sponsored by the federal government. These loans are subsidized by the government so no interest accrues until you begin repayment.
- Work
Student employment and work study programs help students pay for costs such as books, supplies, and personal expenses. Work study is a federal program that provides students with part-time employment. Working while attending school helps you financially and provides valuable work experience.
The costs of attending college can be broken down into several components.
- Tuition and Fees - These are the costs of your education and may vary based on your academic program and the number of credit hours you are taking.
- Room and Board – If you live and eat meals on campus, the costs will be billed by your college. The charges will vary depending on your room arrangements and meal plan choice.
- Books and Supplies - These costs cover your course materials. Your expenses may be higher if you are in a major that is heavy in supplies, such as art or architecture.
- Personal Expenses - Personal expenses are for things like laundry, telephone, and the occasional pizza. Keep careful track of your personal expenses, as they can quickly add up.
- Travel - You won’t have to include travel in your budget unless you live more than a few hundred miles from campus. Make your own estimate based on how and how often you plan to travel.
Do not be intimidated by the financial aid process. The most important thing you can do is to stay one step ahead of deadlines. When it comes to financial aid, time is money.
After deciding on a college, contact the school’s financial aid office. Find out about deadlines for institutional, state, and local scholarships. Apply for any possible scholarships by the application deadlines.
You will be required to submit a Free Application for Federal Student Aid (FAFSA) to begin the financial aid process. You should request a Department of Education PIN number before you submit the FAFSA. The PIN serves as an electronic signature for FAFSA on the web and significantly reduces processing time. If you are going to submit the FAFSA by mail, get one from your guidance counselor. Start gathering identity and financial documents needed to complete the FAFSA. Income and asset figures are needed, so it is a good idea for you and your parents to prepare tax returns as early as possible. It is not absolutely necessary to submit your tax return to the IRS before submitting the FAFSA – you can estimate. Sign and submit the FAFSA as soon as possible, after January 1. Applying early improves your chances of receiving aid. Once the money is gone, it’s gone.
You should receive a Student Aid Report (SAR) in about 2-4 weeks after submitting the FAFSA. Your expected family contribution (EFC) is printed on the first page. This is your expected contribution towards your education. If there are any errors on your SAR, make the necessary corrections and mail it back immediately. This can also be done electronically. If your FAFSA is chosen for “verification”, you will see an asterisk next to your EFC figure on the SAR. You will be asked to submit additional documentation to the financial aid office at your school. Do this in a timely manner.
Financial aid award letters will begin arriving in the spring for the colleges you’ve chosen and been accepted to. Read these letters carefully and be sure to meet deadlines for accepting awards.
If it is difficult for your family to pay the EFC for the semester, it’s time to start pursuing alternatives such as parent loans or private loans. If student loans are a part of your financial aid package, your college will send instructions for the loan application. Start this process as soon as you can. Federal Stafford loans require you to complete loan counseling before receiving funds. Your college will inform you of any needed loan counseling.
If you feel that your full financial aid need has not been met or if your family’s financial circumstances have changed, you can appeal the aid award decision.