I’M IN!!!
- ACCEPTED
- RECEIVED FINANCIAL AID
- BALANCE DUE THE COLLEGE – WOW, THAT MUCH!
National Decision Day (May 1) and Open Enrollment commitments have come an gone and now it’s time to figure out how to pay. The deposit was sent in but there are remaining college costs. Referred to as the “net educational costs,” these charges will soon appear on the college tuition bill hitting the mailbox in July. Costs that unless “resolved” will prevent access to a dorm, the start of classes and earning the right to call oneself a college student. Arrangements need to be satisfied before the billing due date generally in August.
The average student and family bound for college in September may now find themselves in a new stage of stress, figuring out how to pay their remaining educational cost. Like during the search and select stage of one’s college plan, developing a payment strategy is an immediate task for all students and families. A good payment strategy requires a plan that is based on the availability of resources for not one year but the financial needs over the course of a student’s four-year enrollment.
What Was I Awarded?
Double check the Financial Aid Award Letter to determine what has been provided in the form of tuition assistance. Resources from programs administered through the college, state agencies and the federal financial aid programs. Included can be merit scholarships, Institutional Grants, a Federal Direct Loan and/or Federal Work-Study. A state grant or private scholarship may also be included in the award letter is reported to the school. The difference is known as the “net educational cost”, the amount due to the school.
- Cost of Education
- minus College and Private Scholarships
- Need-Based Grants and Self-Help (Federal Direct Student Loan or Federal Work-Study)
- the “Net Educational Costs” – I’m what’s owed to the school!
What Are My Resources?
Looking beyond the programs disclosed on the Award Letter, students and families have four primary resources to use to pay the net costs. They include savings, monthly discretionary funds, earnings on investments/insurance and education loans. A strong Payment Strategy may include one or more of these resources. Resources that when used will resolve the tuition bill.
Savings – Investments – Discretionary Funds
Savings, funds accumulate over time, as part of a 529 Plans, education savings accounts, insurance and investments programs can be used to assist in meeting college costs. Conversations with a financial adviser prior to taking a distribution are step number one when thinking of using a resource from this category.
Home equity is another valuable resource for parents looking to capitalize on the value of their home and how it can turn into a low-interest rate and resources for their student(s). Parents in putting their home to work should consult with their local lender or credit union.
Another choice, some time overlooked is the use of a monthly tuition payment plan. When consulting with parents the question I usually ask is have you been paying out of pocket for ice time, AAU sports, sports, dance or other enrichment type programs? Did you just pay off a car loan? Or do you have a relative or family member interested in supplementing the cost of school? If the answer is yes, a Tuition Payment Plan is a great payment strategy.
A Tuition Payment Plan is an interest-free program administered by the college or university and requires ten (10) monthly payments during an academic year. Payments are made from July to April, can equal the entire or a portion of the remaining net educational cost due to the school and many times carry a small application fee. A payment plan allows extended family members to also participate in making tuition payments without assuming any direct responsibility for a student’s educational cost.
Contributions from grandparents and relatives are also a very useful means of paying the educational cost, however, impacts on financial aid eligibility must also be considered.
College Loan Game
The college loan game is the process of looking to last resort resources to assist with meeting educational costs. They include loans that students and parents can seek to obtain including a home equity loan, Federal PLUS Programs and Private Education Loans.
Federal PLUS Program
Offered through the Federal Student Aid Office of the US. Department of Education, the Federal Direct PLUS Loan, commonly known as the parent PLUS loan is a credit-based loan available to parents of dependent undergraduate students.
Private Education Loans
Typically referred to the loan of last resort, a Private Education Student Loan is a credit-based loan available to a student to meet the net educational cost to attend school.
Creating Your Strategy
Before diving into using a private loan application, consider a few things. As stated, this is a four-year process requiring annual calculations and the forecasting of four-year financial needs. Adjusts and changes based a student enrollment status, modifications in educational expenses and changes to a family’s financial profile may require less or more resources. Multiple options can be used to establish and maintain a payment strategy. Unique family resources including offers to help from extended family members (i.e., grandparents) may require more in-depth conversations and decision making. A payment strategy can be call for using one or more resource or program outlined in this piece. Ultimately a student and family should put all of their resources to work to ensure the best financial decision that minimizes excessive and long-term debt and provides the best college option for the student.
Disclaimer
This piece is intended to provide education and guidance on strategies to pay the remaining “net educational costs.” We recommend that students and families always consult with their investment, wealth manager or tax professional to determine the impact on any and all financial decisions.