An Unconventional Guide to Paying for College

College Students Face Stiff Competition for Financial Aid

Posted by on Jan 26, 2012 in Completing the FAFSA, Scholarships and Grants | 8 comments

USA TODAY recently ran an article about the shrinking pool of financial aid, and how there is more stiff competition than ever for the financial aid that does exist.

Here is the down and dirty according to USA TODAY: 

Several states have reduced scholarships or toughened eligibility criteria for financial aid. Eligibility for the maximum Pell Grant, the largest source of federal financial aid, has also been tightened. Meanwhile, the number of families applying for financial aid has soared. More than 21 million families filled out the Free Application for Federal Student Aid (FAFSA) for the 2010-11 academic year, last fall, up 49% from two years earlier.

This sounds like depressing news, but I would give a much rosier view of the situation. Yes, the Federal Pell Grant applicant pool has grown tremendously. However, the Pell Grant is a guaranteed award. Meaning if you qualify, you earn it. Our government has set aside enough funds to cover every student that applies. This may not say good things about our government’s fiscal policy, but it should give you some comfort in applying for the Pell Grant. Also, Pell Grant funding has been secured through 2015 according to new legislation.

The article also notes that states have tightened the reins on qualifying for state supported scholarships. This is a sad trend but not one without hope. The positive trend that I have seen in recent years is that colleges have stopped relying as heavily on state supported scholarships, and they have begun relying more on school supported scholarships. Athletic departments are pumping money back into schools to be earmarked for Academic scholarships. Private donors are increasing their contributions which are earmarked for scholarships. Cost cutting measures have freed up University funds to be put back into the scholarship program. Colleges and universities have begun to realize that students are their greatest asset. Just like great employees make a company profitable, great students make a school excel. Scholarship money is one of the main lures to attract top tier students.

The USA TODAY article does go on to give three tips to deal with what they believe is a worsening financial aid situation: 

1. Pay attention to deadlines.

2. Be on the lookout for private scholarships.

3. Use net price calculators as a screening tool, but exercise caution.

I actually strongly agree with all 3 of these points. We have talked numerous times here about how important financial aid deadlines are. Missing a crucial financial aid deadline could mean the difference in thousands of dollars in aid.

Private scholarships, and especially local scholarships, are in my opinion the absolute best source of financial aid. You compete against a limited applicant pool, and you can gain the support of your local community. It’s a win – win!

Finally, the article mentions the debacle that is a net price calculator. The intent was good, the end result was a confusing mess. The net price calculator was a mandate from the Department of Education for all schools to be able to give prospective students an estimate of what they could expect to pay. The net price calculator gives all students an estimate of their tuition and fees, and then subtracts an estimate of their financial aid. The problem is that these estimates are almost always way off. The calculator often does not include private scholarships, and never includes student loans. These differences are not explained to students, which gives them a very skewed view of the financial aid that they can actually expect to receive from one school versus another.

With that said, I firmly agree with this author’s suggestion to take the net price calculator with a grain of salt. It can be a good tool, but should not be your deciding factor.

Have you noticed any drop in financial aid in recent years?

 

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Federal Student Aid Unlocked: Pell Grant

Posted by on Jan 10, 2012 in Completing the FAFSA, Scholarships and Grants | 2 comments

This post was originally published back in 2009 on the first variation of the Money for College Project. I would selfishly like to think that my writing has improved from these humble beginnings, but it’s probably not true. Regardless of the writing, the information is still gold. The Pell grant is the premiere need based grant funded by our tax dollars and administered by the Department of Education. Complete your FAFSA to qualify for this award and all other federal grants and Stafford student loans.

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Every year Federal Student Aid (FSA) provides more than $83 billion in financial aid across their various programs. This money assists about 14 million students attending college. With those staggering numbers I can promise you that if you complete the proper steps I outline here on this blog, you can get a piece of that money!

Over the next few days I would like to explore the different types of Federal Student Aid. With 10 different programs that offer assistance to students, it is easy to get lost in a cloud of numbers and unfamiliar terms. Hopefully, after we have gone through this journey of exploring every program in detail, you will have a better understanding of how you fit into the big picture, and most importantly, where you can go for your money!

Before we get into the individual programs, it is important to note HOW one would go about applying for this aid. GOOD NEWS! It’s simple: The Free Application for Federal Student Aid (FAFSA). With one application you will be evaluated for all 10 FSA programs. Simply go to www.fafsa.gov and follow the steps to submit your application (Intimidated by the FAFSA?? More to come on that later so stay tuned!).

Now that you know how to apply for all these programs, let’s look a little closer at each one.

First: Federal Pell Grant

This is the most important Federal grant as it is the largest grant. Since it is a grant, it does not have to be repaid. The Pell Grant is available exclusively to undergraduate students and your eligibility is determined by your financial need. Your financial need is used to determine how much of the Pell grant you will receive, if any.

For the 2009-2010 award year (which runs July 1st 2009- June 30th 2010), the maximum amount you can receive in Pell is $5350 (**For 20120-2013 the maximum Pell award is stuck at $5500). Depending on which college you attend this could be enough to pay your entire tuition (eg. the school where I (formerly) worked is only $1746 for a full time student, per semester!) Or if it will not pay your entire tuition, the Pell grant will almost certainly make a significant dent in your college tuition bill.

Also, for part-time students, the Pell grant can be applied to your tuition through a scaling award system. Here is an example: If you receive the maximum Pell award of $5350, that breaks down to $2675 in Fall and $2675 in Spring (if you come full time). If you come half time, the Pell amount would be cut in half or $1338 each semester. Now keep in mind, your tuition should also be less, so Pell should cover roughly the same percentage of your tuition bill whether you take full or part-time classes.

Coming up next: Federal Supplemental Educational Opportunity grant (FSEOG)

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Debt Deal Leaves Students With Higher Loan Costs

Posted by on Aug 3, 2011 in Scholarships and Grants, Student Loans | 0 comments

We all know by now that Congress passed the debt deal yesterday, and it was signed into law by President Obama.

That sounds great, as our nation avoided default and a potential market crash, but what does that mean for you as a student?

There were three main categories of student financial aid that were affected by the debt deal. Here is the recap from NASFAA.org:

  • Pell Grants: While many programs faced cuts in this bill, the Pell Grant program was provided with additional mandatory funding for both FY 2012 and 2013.  Specifically, the package provides an additional $10 billion in mandatory funds for Pell in FY 2012 and $7 billion for FY 2013, amounts that should come close to preserving a $5,550 maximum award.  When the President released his budget in February, Pell faced a projected $20 billion shortfall for FY 2012.  The elimination of the Year-Round Pell Grant in the final FY 2011 budget bill reduced this shortfall to $11 billion.  Even with the additional mandatory funding provided in the debt reduction package, Pell will still face a $1.3 billion dollar shortfall for FY 2012.

  • Interest Subsidy for Graduate Students: The Budget Control Act also eliminates the in-school interest subsidy for graduate and professional students beginning July 1, 2012, a provision that would save $18.1 billion from FY 2012-21, $8.2 billion of which is from FY 2012-16, according to the Congressional Budget Office (CBO).  The legislative language clarifies that the subsidy elimination does not apply to students taking preparatory coursework and those in programs leading to teacher certification where the credential is awarded by the state instead of the institution.

  • Direct Loan Repayment Incentives: Repayment incentives were also eliminated in the final package.  The incentive for using automatic debit repayment provided borrowers with a 0.25 interest rate reduction and the up-front interest rebate incentive was equal to 0.5 percent of the loan amount and applied toward the 1 percent loan origination fee.  For PLUS loans, the up-front interest rebate was 1.5 percent applied toward the 4 percent origination fee. Borrowers were able to keep the rebate if they made their first 12 payments on time.  The language prohibits the Department of Education from authorizing or providing repayment incentives on new loans disbursed on or after July 1, 2012, except that an interest rate reduction may be provided to a borrower who agrees to automatically debited electronic payments.  The CBO projects the elimination of the origination fee rebates would yield $3.6 billion from FY 2012-21.

So what this means for you as a student is that your Pell Grant is safe.

If you are a graduate student, you will be stuck with paying the interest on your loans while in school, which will drive up the cost of your students loans.

When you go to repay your student loans (all federal Stafford, Grad, and PLUS loans) you will not have access to repayment incentives that will lower the cost on your loan.

Bottom line, you will end up paying much more for your loans!

Also, please stay tuned as another provision of the debt deal is to continue looking for ways to further reduce costs. This means that all federal student aid programs might not be out of the water yet!

Once again, it is important to contact your congressman to let them know how you feel about your federal student aid.

Your voice is important!

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Tentative Debt Ceiling Agreement Saves Pell Grant

Posted by on Aug 1, 2011 in Scholarships and Grants | 0 comments

Late last night, Congressional leaders tentatively agreed on a debt reduction plan that would eliminate nearly $3 Trillion over the next ten years.

The plan involves a series of cuts, but it does include student aid funding for the Pell Grant for at least the next two years (AY 2012-2013, AY 2013 – 2014).

Funding has already been appropriated for the upcoming Academic Year (AY) 2011-2012, so it cannot be taken away.

The Pell grant seems to have been saved in this most recent agreement. The self-imposed deadline is tomorrow, August 2, and it seems that this is the bill to get approved and stop our government from reaching default status on its debts.

However, the bill also includes a measure to reach an additional agreement by committee by Thanksgiving to bring about even larger cuts.

These cuts could very well include all federal student aid programs, even Pell.

If you currently receive any aid from the Federal Government (Pell, Stafford Loans, FSEOG, Perkins) then you may wish to consider contacting your Congressman or Senator and expressing to them how much your Federal Student Aid means to you as you pursue your education.

If we remain silent in this fight, then our student aid might be taken away or reduced, which will have a direct impact on you as you pursue your education goals.

If you want change, you must act now!

Photo used under Flickr Creative Commons agreement: Scazon

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Know Your Student Loans. Save Money

Posted by on Jul 30, 2011 in Student Loans | 0 comments

A recent article in the Chicago Tribune has detailed why it is important to understand the student loans that you have received.

“After tapping as much free money as possible, your next step is to choose student loans. You want to turn first to loans from the federal government rather than private loans that come from a bank or non government lender.”

Gail MarksJarvis goes on to write that “The paperwork from your financial aid office will probably give you a choice between subsidized Stafford loans or unsubsidized Stafford loans. There is a huge difference between them. If you qualify, take the subsidized Stafford loans, which carry a $19,000 limit for four years of undergraduate studies. Subsidized means the government reduces your costs by absorbing interest during in-school deferment and provides a very low interest rate, of 3.4 percent. That rate is for loans originated during the 2011-12 academic year.”

This is excellent information. It is important to understand that the subsidized loan you are taking out will not incur any interest costs while you are in school. You are also not required to repay that loan until 6 months after you graduate.

The unsubsidized loan is similar, in that you are not required to make any payments until six months after you graduate, but the interest does begin to accrue once the money is disbursed.

With unsubsidized, a smart financial decision is to pay the interest only portion of your loan while you are in school, thus reducing the balance you will pay once you graduate and officially begin repayment.

Parents also have the option of applying for a federally guaranteed PLUS loan. This is a student loan in the parents name at a fixed 7.9% interest rate.

The last student loan option is private loans as MarksJarvis does on to explain “Although federal loans all have fixed rates, or interest rates that will never increase during the 10 years you pay them off, that’s not the case with many private student loans. They might have a starter interest rate that looks attractive, but with a variable rate that can increase continually over 10 years. So the rate might climb well past the 7.9 percent on parent PLUS loans.”

As you can see, there are many different types of loans, and it is imperative that you understand the terms and conditions of all of them.

As always, you are the only one with your best interest at heart. Remember that knowledge is power, and squeeze every ounce of information you can from your college financial aid office.

Photo used under Flickr Creative Commons License: AMagill

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