Cost has always been a major factor for families when choosing a college. This year it has moved to the top of the list for many high school graduates who are trying to decide where to head in the upcoming years. Application figures won’t be available for a few months, but state public colleges across the country are reporting record turnouts at college fairs and open houses. Financial aid officers have been extremely busy with more and more students and parents asking about financial aid and loans. It seems that all the focus is on the economics of an education this year, and that trend is sure to continue.
Many private colleges are reacting to this situation by expanding financial aid packages in an attempt to avoid losing the families who are on the fence and might be priced out of attending. Some private colleges have begun to impose a hiring freeze and have stopped construction projects in anticipation of the need to increase financial aid to the students.
There is no doubt that cost is becoming one of the major factors in the minds of students and families. This may end up being a good thing for everyone as the cost of college has ballooned over the last 5 years. Perhaps colleges, both private and public, will start to bring costs down to a manageable level so that a degree is once again possible for everyone in this country.
A few things to consider when comparing public and private colleges and universities:
| Average College Costs 2007-08 |
But Did You Know That… |
| Private four-year $23,712 (up 6.3 percent from last year)
Public four-year $6,185 (up 6.6 percent from last year) |
- About 56 percent of students enrolled at four-year colleges or universities attend institutions that charge tuition and fees of less than $9,000 per year.
- 43 percent of full-time students enrolled in public four-year colleges and universities attend institutions that charge tuition and fees between $3,000 and $6,000.
- While private four-year institutions have a much wider range of tuition and fee charges, only about 6 percent of all students attend colleges with tuition and fees totaling $33,000 or higher per year.
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| Public two-year $2,361 (up 4.2 percent from last year) |
- 22 percent of all full-time students attend public two-year colleges.
- For full-time dependent students at public two-year colleges, net tuition and fees are no more than 2% of the family income.
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| Students will pay, on average, from $371 to $406 more than last year for this year’s room and board, depending on the type of college.
The average surcharge for full-time out-of-state students at public four-year institutions is $10,455. |
- More than $130 billion in financial aid is available to students and their families.
- About two-thirds of all full-time undergraduate students receive grant aid. In 2007-08, estimated aid in the form of grants and tax benefits averaged about $2,040 per student at public two-year colleges, about $3,600 at public four-year colleges, and about $9,300 per student at private four-year colleges.
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New York Senator Chuck Schumer has been pushing hard for a three point plan aimed at ensuring that private student loans are available to those who need them. The credit crisis has resulted in close to 30% of all private lenders closing their doors. Among the top lenders, most have tightened underwriting standards which has severely limited the supply of loans.
The following lenders have drastically reduced private lending:
Lender / Lost Volume
State Loan Agencies / $750 - $1,000 million
Sallie Mae / $300 - $900 million
EFP / $750 - $1,100 million
Bank of America / $700 million
Key Bank / $450 - $500 million
Campus Door / $375 - $450 million
Student Loan Xpress / $290 million
My Rich Uncle / $227 million
College Loan Corp. / $200 - $250 million
Wachovia / N/A
Senator Schumer has received and encouraging response from Margaret Spellings, the Dept. of Education secretary and hopes to have a commitment from the federal reserve and treasury by next week. The main three points of the plan are:
- Encourage colleges “to enroll in the Direct Loan program “as a backup for their students” in the
event that private loans become less available.” In dozens of calls that I have had with financial aid
administrators recently it seems more and more schools are heeding his advice.
- Establish a commission to ensure government loans will be available if private loan market collapses.
- Monitor implementation of rescue plan to ensure student loan market is protected.
This all comes as good news to college students who are finding it extremely difficult to pay for college. For most student enrolled in a four year school, the entire act of funding their education has been turned upside down in the last 12 months. We will see if this plan can turn things around.
College is expensive. There is no way around the rising cost of college, other than maximizing the free money and financial aid possibilities that exist for you. It is amazing how many students aren’t willing to put in the time to get their share of this money. A recent study showed that one year at a public university consumes 25% of the average median household income in the USA. For those looking to attend a Private University, that number soars to 57%.
So how do you get started? Well the first thing you should do is read this list. The second step is to talk to your high school guidance counselor and the college or university’s financial aid office. Make sure you have done your homework before you go so you are ready to ask the important questions. The third thing you absolutely MUST do is fill out the FAFSA or Free Application for Federal Student Aid. Taking the half hour that this application requires automatically qualifies you to receive federal loans and grants.
So now on to the tips. They are broken down into three easy categories.
1. FREE MONEY - We all love free money, here’s how you get it.
The following is tips to get money that you DON’T have to pay back. Keep in mind, a lot of scholarships and grants require a little effort and apply to certain individuals, but that just means that there are fewer people who are likely to apply for it. Take advantage of as much as you can.
Scholarships and Fellowships - There are more than one million scholarships hand out each year. They are based on certain skills or in many cases on individuals of certain races, nationalities, religious affiliations, location, and even relation to a cancer victim. Obviously, many of these will not be accessible to most of you, but with a little patience and research you just may find one that you are eligible for. A great site for searching for scholarships is Fastweb. Remember, this is free money so take the time to research it.
Federal Pell Grant - This is a federal assistance grant that is awarded to lower income students who haven’t yet received a bachelor’s degree. Awards range from $400 to $4,000 based on need, and remember that this is free money. As long as your family income is below $50,000, it is worth applying for.
Academic Competitiveness Grant - This grant is awarded to first-year college students who graduated after 1/1/06 and second year college students who graduated after 1/1/05. It is tied in to the Pell Grant and recipients receive an additional $750 for freshman and up to $1300 if you are a sophomore.
National SMART Grant - (National Science and Mathematics Access to Retain Talent) This grant is available for third and fourth year students who maintain a 3.0 GPA and are majoring in life science, physical science, computer science, mathematics, engineering, or a foreign language. This grant can get you up to $4000 per year.
2. Scholarships for Nerds - All of a sudden, being a nerd, geek, dork isn’t such a bad thing. Use the gifts you’ve been given and get some free money for college.
Google for Girls - (Anita Borg Scholarship) $10,000 for senior women in the field of computer science, computer engineering or a related technical degree.
Apple Scholar - Winner gets a MacBook, iPod Nano, and $2,000. This scholarship is available to high school seniors who show excellence in technology and use that in an innovative way.
Microsoft Scholarships - $500,000 up for grabs each year to undergrads.
3. Loans - These need to be paid back, but federal loans offer a great rate and relatively easy repayment. Here are the basics on loans. Proceed with caution and know what you are signing up for.
Stafford Loan - This loan is offered by private lender (FFELP) or directly by the government (FDSLP). They are offered as subsidized loans which means that you pay no interest while you are in school, or unsubsidized which means you pay interest while you are in school. The limits of these loans are up as of last year to $3500 for freshman, $4500 for sophomore, and $5500 for each remaining year. These loans have a fixed rate of 6.8% and that rate is dropping over the next few years.
Perkins Loan - This is a campus based loan that is made by the school you attend. It has a fixed 5% interest rate. The amount available depends completely on the school you go to and can be as much as $4,000 per year up to a maximum of $20,000.
Plus Loan - (Federal Parent Loan for Undergraduate Students) This loan is offered to supplement the financial aid package a student receives and is taken out by the parents of the student. It has a fixed 8.5% rate this year.
Private Student Loan - These loans are offered as an alternative to the federal loans available and should be used for the extra costs associated with college. They are credit based loans and require a co-signer in most cases. They carry the same repayment schedule as most federal loans and allow the student to defer repayment until after graduation, but like an unsubsidized Stafford Loan, the interest will accrue while you are in school.
4. Other Ways to Get Money for College - Above are the most common ways to pay for college. The following are some alternatives that require a little more dedication and perhaps rethinking how you want to attend school, but they are good options for those of you who just can’t get the money any other way.
Military Service - The GI Bill and various other incentive programs exist to help those who wish to put in a few years in the military. There is also the ROTC program which helps you work your way through college.
Federal Work Study - The FWS Program allows students to work on campus for a small stipend to help pay for college. It is usually a part time job around the college and pays a little extra to help you afford your life in college.
529 College Savings Plan - This is a pre-tax deduction which allows parents to save for their child’s education. Not really an option unless your parents thought ahead, but what a nice perk if they did. The other bonus of these plans is that they aren’t taken into account when the financial aid office is figuring out a student’s financial aid eligibility.
Community Service - There are numerous programs such as AmeriCorps, PeaceCorps, Teach for America, and the National Health Service Corps which offer tuition money for those willing to volunteer a few years of their life for a great cause. The bonus is that you get to travel the world and have some amazing life experiences.
College isn’t cheap, but the more effort you put in before you head off to school, the better you will be when you graduate. Take the time, do the research, exhaust every possibility, and then you can go and enjoy your four years in college. Good Luck.
