Successfully Managing Your Financial Aid as a Student
Getting financial aid is only half the battle. After you have received your financial aid package, you must successfully manage its use. For many, this can be a frustrating task.
Fortunately, if you plan ahead you should have no problem. The following set of articles offer helpful tips that will enable you to navigate your way though the financial aid red tape with utter ease.
Starting Your Financial Aid Search
Financial aid is highly important to most students needing assistance to pay for their education. According to the National Post-Secondary Student Aid Study (NPSAS), 65.7% of graduating seniors from 4-year colleges have some debt, with an average debt of $19,237. Most students who choose to further their education and pursue advanced degrees have even more debt with an average that ranges anywhere from $27,000 to $114,000. With figures as high as these it makes very good sense to learn how to make the most out of all of your financial aid options.
You will need to estimate your expenses to determine how much aid you require. Be realistic about how much you will need to live while in school and leave some room for sudden and unexpected expenses that could arise. FinAid.org is a non-profit public service site, recommended by the US Department of Education, and has several types of financial aid calculators to help you accurately estimate your needs.
Scholarships
Every student should apply for scholarships as early as possible as they are the best way to pay for college. It looks great on your resume when you list the scholarships you have earned and is money you do not have to pay back. There are thousands of scholarships available. However, applying to them takes forethought, time and effort. Start your scholarship search early and apply to as many as possible. Check with your college or university as most have their own scholarship programs, and then search the web for local, state and even national scholarship opportunities that you are qualified for. One search tool is Scholarship Experts, which has been voted by Forbes magazine as the best scholarship website every year since 2003.
FAFSA
Next all students should apply for need-based aid with FAFSA. The FAFSA is a single comprehensive application to receive aid from federal and state governments. This one application determines your eligibility for a large and wide variety of aid. However, while FAFSA awards aid in many forms, grants and scholarships are far more desirable than loans which you will need to pay back. If you are financially able, only accept the most favorable aid that you are given.
Grants
For instance, grants are a form of gift assistance with no obligation for work or repayment. Grants are awarded on several need-based factors and if you receive them, are your best options through FAFSA. Work-study is another coveted form of aid although it means working part time while attending school. This is your second best option if you are able to work and are awarded a work-study package. Even though you must work, the part time jobs offered are often easy to do and accommodating of a student's hectic schedule.
Loans
If you need more aid and have to consider loans, federal loans (which you also apply to through the FAFSA) are the best choice. While there are many types of federal loans they all fall into one of two categories; subsidized and unsubsidized loans. Subsidized loans do not accrue interest while the loan is in school, grace, or deferment status. If you must accept a loan these are the best types to have.
Unsubsidized loans require the student to be fully responsible for paying the interest regardless of the loan status. Interest starts to accrue the day the loan is disbursed. Ultimately this means you will owe more money after you graduate.
Apply for private loans only when truly necessary. Private loans (sometimes called alternative loans) can help bridge the gap in your finances if scholarships and federal aid packages do not cover your expenses. However, private loans can have drastically higher interest rates than federal loans and should only be accepted once all other options have been exhausted. Most major banks offer various private student loans. Be sure to shop around and find the best interest rates and terms. Although this takes time and effort, especially since loan terms can be very complex, remember that just a fraction of a reduction in an interest rate will save you a lot of money over the life of the loan.
One Last Piece of Advice
Furthermore, while in school make sure to keep up your grades. Poor academic performance can cause scholarships, grants and other highly favorable forms of aid to be revoked or not offered in subsequent semesters. Also if you have accepted loans save all associated paper work such as interest statements, promissory notes, and other documents. This will help you keep track of how many loans you have taken out and will be important later on when you are subject to repayment terms or if you choose to consolidate.
Article Resources:National Post-secondary Student Aid Study (NPSAS)
Scholarship Experts
FAFSA
The U.S. Department of Education
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College Financial Planning Guide
There is no way to avoid it: college is going to cost a lot. Recent reports show the average cost of tuition at in-state universities was $6,585 in 2008, and that's not even counting room and board. But there is some good news, too. More than $135 billion worth of financial aid is up for grabs this year, which is more than ever before. This means that for students with the foresight to research and plan their school financing ahead of time, attending college is actually more affordable than in previous years. Here are some basic tips to help you get started.
1. Start early by figuring out your expected family contribution
It is never too early to start looking into the financial costs of a higher education. Two of the most important things you will need to know are the cost of tuition at your chosen college and how much financial aid you can expect to receive.
Start by checking out tuition costs on your university's website. From there, it is a good idea to determine how much your family will be expected to contribute. Figuring out your EFC (Expected Family Contribution) will allow you to calculate the exact amount you will be expected to pay. This will go a long way in your planning process.
2. Apply for the FAFSA and do it on time
The Free Application for Federal Student Aid (FAFSA) is used in disbursing not only federal student financial aid amounts, but also Pell Grants, student loans, and college work-study grants. Therefore, it is important that students do not wait to fill out their FAFSAs. Missing the deadline for the FAFSA will cost you a great deal in the long run.
Submitting the FAFSA costs nothing, and you may be surprised at who qualifies for aid. Even families who think they earn too much to qualify are encouraged to apply. Overall, 60 percent of students attending college today earn grant aid, with the amount of aid averaging $3,300 per student at four-year public colleges and $9,600 at private universities.
3. Look around for alternate options
Universities realize that many families cannot pay their Expected Family Contribution without a little help. And while government financial aid is great, it is not a student's only option. For those who may be struggling to pay their EFC, a number of other funding sources exist, including scholarships, fellowships, grants, work study programs, and student loans. Most students use a combination of the above funding sources over the course of their college education.
There are many financial aid options available. Make sure you do your research thoroughly. You do not want to miss out on scholarship or loan opportunities because you did not make the effort to seek them out.
4. Do not rule out schools prematurely
Students should not rule out attending a particular school simply because it has a higher tuition cost. Universities that have higher tuition also commonly offer greater financial aid. This means that the actual cost to attend a private school with higher tuition may not be much more than the cost of attending an in-state school with a lower tuition. A student's best option is to look at a school's overall costs and the financial aid packages available before making any rash decisions.
5. Manage your money wisely
Financial planning for college does not stop once classes begin. Students receiving any type of aid, either through scholarships, grants, or loans, should plan on making a financial budget and sticking to it. Students should also realize that onerous tasks like filling out FAFSA forms and applying for scholarships are not one time events. FAFSAs need to be submitted each school year in order to continue receiving aid, and many scholarships may also be awarded on an annual basis as well.
Article Resources:
Business WeekCollege Answer
Student Aid on the Web
US News
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College Savings Accounts
As college costs continue to rise steeply and steadily, it's more important than ever to start saving for college early. College savings accounts are a good way keep your money safe while letting it grow. By putting money in a college savings account, you gain a tax advantage—in the form of either a credit or a deduction—on the money you withdraw. With the tax advantage, the return on a college savings account is usually better than that on regular savings accounts. However, if you use the money in a college savings account for anything other than education, you will receive a 10% penalty. There are several types of college savings accounts and many varieties within these broad types, so be sure to do your research.
529 College Savings Plan (AKA 529 Qualified State Tuition Plan)
Every state offers a 529 savings plan and every state's plan is different, so be sure to shop around. However, there are some universal characteristics of a 529 plan. Most importantly, you don't pay taxes when you withdraw the money for college form a 529, and many states allow you to claim tax deductions when you put money in.
Anyone can contribute to the account, though only you control it—that is, your child cannot withdraw from a 529 without your permission. If your child doesn't want to go to college, you can transfer the account to another family member, including yourself. And if your child goes to college on scholarship, you can withdraw the money without incurring the 10% penalty.
529 Pre-Pay Plan
There's another type of 529 savings plan: the pre-pay plan. In a pre-pay plan, you pay for your child's education at the current rate. The college then invests the money you contribute as they see fit. Basically, you loan the college money in exchange for the ability to buy future education at today's rate. However, the amount you prepay offsets your future financial aid package, so if you pre-pay $30,000, your child will be seen as needing $30,000 less in financial aid than she otherwise would.
Coverdell Education Savings Account
Like 529 plans, money from a Coverdell Education Savings Accounts can be withdrawn tax free. However, unlike a 529 plan, Coverdell ESAs can be used for private elementary or secondary school expenses. You also have more control over the way your money is invested in a Coverdell ESA than you do in a 529.
However, there are limits on who can invest: if your income is over $95,000, or $190,000 if you're married, then the account won't be entirely tax-exempt, and if you make over $110,000 as an individual or $220,000 then you will get none of the benefits of the ESA. In addition to the income-based phase out, Coverdell ESAs also limit the amount you can contribute to $2,000 per year, so you can't save as much in a Coverdell ESA as you can in a 529. Each type of College Savings Account has its strengths and weaknesses, so be sure to think about what you need in a savings account as you explore your options.
Back to the TopWill Your Employer Finance Your Education?
Having your company foot the tuition bill for your continued education program may sound too good to be true, but the reality is that this practice is becoming more and more common. In fact, according to the National Center for Education Statistics an incredible 21% of graduate students received some amount tuition aid from their employers for the 2003/2004 school year.
Types of Education Employers Will Finance
Employers can choose to finance any educational program they see fit, however they usually only finance educational programs that will allow an employee to graduate and bring immediate and measurable increases in value to the company. Employers want to make sure they sill see a definite return from investing in an employee's education.
One common form of employer-financed education is for those employees that need additional education to obtain a license or certification that will allow them to perform more tasks. Employers usually see quick returns from helping employees obtain licensure. However, some employers will finance an entire graduate degree if they believe it is a good investment. For instance, a promising manager may aspire to move up in the company ranks but a company policy may stipulate that all top-level managers must hold MBAs. This company may pay for the promising manager to earn an MBA. This investment is one that the company will not see returns on for a few years, but one that will pay off eventually if the manager indeed stays with the company and does his or her job well.
How Employer Financing Works
Employers may pay your tuition costs up front or they may reimburse you. Typically employers attach stipulations to their employee education financing programs, which is why some to choose to reimburse employees rather than pay tuition costs up front. Many employers mandate that student employees must maintain at least a B average or else they will not be reimbursed for their expenses. Also, some employers make financially backed employees sign contracts or other agreements stating they will stay with the company for a certain length of time after they graduate. This ensures the company will not lose out on the money it invested paying for an employee to attend school.
Some employers require employees to attend an online graduate school so that workers can attend classes on their own time and still put in a full day of work. Other employers will allow employees to leave in the middle of the workday to attend traditional campus based classes.
Employers may pay for part or all of your tuition and some employers may even pay to cover additional school related expenses such as textbooks. It simply depends on the individual arrangements of different employers. However, according the National Center for Education Statistics employers with tuition reimbursement programs contribute an average of $3,000 per student.
How to Get Your Employer to Finance Your Education
If you want to go back to school and are working full time you should definitely check with your company about employer financing. If you work for a large corporation that has an established continued education financing program getting funding may be as simple as submitting a request through the proper channels.
However, if you work for a company that does not have an established program, you will have to make your case to your employer. It never hurts to propose contributing to your continued education to your employer if you do it in a professional manner.
First, ask for a meeting time with your boss or other key decision maker and come prepared to present your idea. Center your presentation on how continuing your education will allow you to deliver significantly more value to the company. Be specific and clear about where, how and when you could deliver this value if you pursue a continued education program. The more details you can provide the better. Prepare to present details like:
- Which school you will attend
- Which degree you will pursue
- What skills you will learn
- The value of those skills to your employer
- The length of time training will take
- Your workload throughout the education
Next, explain the many benefits to employers who choose to fund their employees continued education. Employers who finance their workers' educations typically see much lower turnover rates than employers who do not pay for college expenses. Also, there are substantial tax breaks for employers who choose to finance their employee's education. Currently, employer tuition reimbursement is tax-free up to $5,250.
Lastly, if your employer is unsure of the returns they will receive, offer to sign a contract stipulating that you will continue to work with the company for an agreed upon length of time after graduation. This can help allay company fears that you may leave after you have received your education.
Most of all remember that asking for employer financing is not unreasonable, but plan on working hard and paying your company back through putting your new skills and educational background to effective use.
Article Resources:National Center for Education Statistics
University of Connecticut, Center for Continuing Studies
The U.S. Department of Education
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Myths about Paying for School
Paying for college can be a daunting adventure but, with some educated foresight and a little sacrifice, almost anyone is capable of figuring out an affordable way to pay for education. Like any difficult task, there are many, many myths that materialize and scare people away from perusing an education. We will highlight a few, but when you're ready to take the plunge and enroll in school it's always a good idea to talk things over with a financial aid advisor at your college of choice.
Myth #1: Only the rich can afford to go to school.
With a copious amount of financial aid available for students, there is always a way to pay for college. Whether you are lucky enough to get a scholarship, or have to take out student loans, in today's economic environment, everybody can afford to college.
Myth #2: Saving for college is a waste of time because it makes students ineligible for financial aid
Colleges judge students based on their families' overall income, not on how much money you have saved in your bank account. Saving is an excellent idea.
Myth #3: Scholarships are only for athletes and minorities.
There are thousands of scholarships out there and they cater to very different groups of people. Do your research and you will find what you're looking for.
Myth #4: Applying for loans is hard.
By filling out the FAFSA , you have already accomplished the "hard" part. After this step, all government loans you are eligible for will come to you. While private loans can be a bit more complicated, nowadays you can do almost everything online and from the comfort of your own home.
Myth #5: Every single loan has a high rate.
False. Student loans actually have incredibly good interest rates. When applying for a loan, be sure to read the fine print and know that it is far from impossible to get a good rate.
Myth #6: You must have good credit to get a loan.
Actually, you don't need any credit to get a loan. Student loan officers do not check credit.
Myth #7: You need a cosigner to get a loan.
Although some loans may require a co-signer, it is easy to find student loans which do not.
Myth #8: There are no loans for graduate students.
There are numerous loans for graduate students. Simply do your research.
Myth #9: Ordinary individuals can't get loans.
Even if you are not a straight A student or a star athlete you are still more than eligible for a student loan.
Myth #10: If I file as a dependent, I will get more student aid.
This is true for certain types of student aid, but it does not apply for loans.
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