Paying for College – Know YOUR Numbers Early!
Education after high school is a critical life event that every student (and their family) needs to prepare for and pursue. Planning one’s pathway is based on academic potential, personal interest, and the motivation to attend that begins as early as middle school and culminates at high school graduation. Planning typically centers around setting goals and expectations, talking about majors and school settings, and one’s readiness to follow an educational path after high school.
But there is the elephant in the room. Students and their parents, many times, search, apply, and even commit to a college or university without understanding the financial implications. Today, the process of purchasing a first-time home, car, or even remolding one’s home requires prequalification. A review of one’s budget, resources, and ability to pay occurs are all part life-changing purchase. The process of prequalifying is to learn what one’s financial gap could be when considering large consumer purchases and how to make wise choices to achieve goals. A process that, to this day, seems to come late in the college shopping experience.
Two Steps to Prequalification
Parents of rising Sophomores and Juniors with an eye on college should learn their Expected Family Contribution, the EFC number early.! Although not carved in stone, the EFC is the first number used in the process of determining a student and family’s demonstrated (financial) need. As the first chart illustrates, as school options change, so will the cost of attendance (tuition, fees, room, board, and other indirect charges), and the demonstrated need. Secret #1 – the EFC, never changes..
Now we need to learn the rest of the calculation to understand what our financial gap (prequalified) would look like as we go shopping.
As part of the overall college selection process, we need to know what a student/family might earn in tuition assistance money? Tuition Assistance is the financial support that comes from multiple sources to help supplement a student/family’s ability to meet the cost of attendance at a specific school. Financial aid, scholarships, grants, and self-help (loans and work) are typically what fill the category. The other driving factor is how a student’s profile matches a school’s admissions requirements, enrollment, and business (revenue) needs. Secret #2 – Schools have different needs; students offer different values; schools award students different money!
So we have walked through a high-level paying for College 101 Overview. Understanding the family’s financial gap is in essence a form of pre-approval, pre-qualification. The beginning of the college search and selection journey with numbers in mind is like buying a first home. You can fall in love with the home, but if you can’t afford to move in you’ll be in financial trouble. Falling in love with the “dream” school can be the same.
Find the right education path, for the right reason, at the right school for the right investment!
Questions on your EFC and how to ultimately learn your financial gap, schedule a conversation to learn how Get College Going can help!
Looking for college planning support during these uncertain times, consider Pivotal College Years. Pivotal College Years, an online college planning resource, offers educational information, downloadable reference documents, and resources before, during, and after college. Sign up for Access to the College Planning Portal for Families Everything you need for college planning in one place!
COLLEGE PAYMENT PLAN
On July 1, most colleges and universities sent their first-semester bill of the upcoming 2020-2021 Academic Year- Freshman, Transfers, and those returning to the campus.
For incoming Freshman, the bill signals the culmination of a student and family’s hard work to find, select, and enroll in the college or university of their choice. Now its time to pay up!
The bill sent from the Student Accounts-Bursars Office may look like the financial aid award but includes other charges making up the total cost of attending.
While appeals for additional tuition assistance may still be in the process due to COVID-19, it is essential for each student and their parent(s) to finalize their payment strategy. Resolving the bill now will eliminate stress and anxiety going into the final part of the summer and with earlier than typical move-in dates scheduled.
How Will You Pay the Bill?
Financing resources at this time of the year generally shift from the institution, federal, and state aid to personal resources, external scholarships, and self-help (loans and work), and relatives. Financing resources will depend on the availability of immediate savings, eligibility for private education loans, or the ability to work & study during the school year.
College savings accounts, 529 Plans, or other investment programs, when available, are perfect resources to use to meet college costs. There specific use, when, and how much should be with the family’s financial planner, reviewed with the family’s financial planner. Note: The use of retirement savings is NEVER recommended!
Tuition Payment Plan
Interest-free payment plans offered through the college or university allow a student/family to pay all or a portion of the net tuition. Regular monthly payments are made to the college or university during the semester. All payment plans require a one-time application fee. Programs are administered on behalf of the school by a third-party provider—information on a school’s specific payment plan found on each institution’s website.
Federal PLUS Loan
PLUS loans are available to parents of dependent students who are attending on at least a half time basis. A parent can borrow to fund a portion or all of the remaining balance due to the college. A PLUS Loan is a credit-driven loan program that requires no income, asset, or collateral requirement. Repayment begins within 45 days of the full disbursement with repayment factor over a five to ten year period. The interest rate for the academic year 2020-2021 will equal 5.02%. To apply for a Federal PLUS Loan, go to https://studentaid.gov/app/launchPLUS.action and start your loan application. Once approved, loan funds are a credit to the student’s account by the school who manages the disbursement of the loan during the academic year.
Private Alternative Loan
Many colleges work with specific lenders to provide private education loan referral information. Students and their parents can also go directly yo a lender to begin the application process. Alternative education loans historically referred to as a loan of last resort, is a credit-driven loan program—eligibility criteria, including interest rates, credit criteria, and repayment provisions. Interest rates range as low as 4% to 7% based on the borrower’s (co-signers) creditworthy status and if repayment will begin immediately or deferred. Most, if not all, first-year students will require a creditworthy co-signer who can be a parent or grandparent. Students and their parents should check their school’s website for recommendations on prospective private education loan lenders, including the AAA Advantage Loan offered by AAA Northeast.
Personal Saving and Resources
All financial experts recommend that families do not touch retirement savings to meet educational costs.
Ongoing Financial Aid Appeals – Students and families should consult with the Financial Aid staff at their college to discuss eligibility for assistance under extenuating circumstances.
Need help with options, financing strategies, and meeting college costs, call to schedule a conversation.