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Tackling the high costs of higher ed

Tackling the high costs of higher ed

Even if funds for college haven’t been squirreled away since before a child’s first steps were taken, higher education isn’t necessarily out of reach. Numerous financial aid options are available from a variety of sources. It just takes some planning and foresight to patch together the funding to see a scholar through to graduation.

Types of financial aid

Basically, there are two main types of financial aid: aid that doesn’t need to be repaid and aid that does. Grants, scholarships and work-study funds fall into the former category, while loans fall into the latter.

Grants are often awarded based on need, though they may be available in other instances. Scholarships tend to be offered on merit, such as for a particular talent demonstrated through academic or athletic achievement. Recipients of a scholarship may be required to abide by certain rules to keep the funding, such as maintaining a minimum grade point average. Both of these financial aid options are highly desirable, which means competition can be intense.

Work-study funds may be available to students who demonstrate need. Typically, work-study positions are jobs on campus that are funded by the federal government and pay at least the federal minimum wage. Positions – and pay – vary from campus to campus and may involve everything from providing administrative support in the registrar’s office to working as a resident assistant in campus housing.

A popular method of financing higher ed is a student loan. As with any loan, the amount borrowed will need to be repaid with interest.

First stop: federal government

When thinking about financing higher ed, students and their families will want to explore the above financial aid options through four main sources: the federal government, their state financial aid agency, their desired higher ed institution (or institutions, if a few are in the running) and private organizations.

As the biggest provider of student aid – helping more than 13 million students with more than $120 billion in grants, scholarships and loans – the federal government is any prospective college student’s first stop. The Federal Student Aid website offers resources as well as the critical Free Application for Federal Student Aid (FAFSA).

The FAFSA requires input about your family income, tax returns, investments, demographics and financial commitment, among many other details, and is used to determine your eligibility for federal financial aid. It factors into state and institutional aid decisions, as well.

The FAFSA application period opens every October 1 prior to the next school year, and applicants are encouraged to complete the process as early as possible. Although the federal deadline for financial aid is June 30, states and institutions each have their own deadlines, with some as early as December.

Federal grants that consider financial need include the Pell Grant and the Federal Supplemental Educational Opportunity Grant. For aspiring teachers, the Teacher Education Assistance for College and Higher Education (TEACH) Grant program provides some aid in exchange for a commitment to serve in low-income schools post-graduation.

Even if students don’t qualify for federal grants, they may be able to secure federal student loans to bridge funding gaps. With a subsidized loan, students can benefit from having their interest paid by the U.S. Department of Education while they are in school and for six months after graduation. Subsidized loans tend to offer slightly better rates than unsubsidized loans, which are available to students regardless of financial need and which require students to foot the bill for all interest charges.

Next stops: state and institutional aid offices

State financial aid offices offer many of the same types of aid as the federal government, but students may find more opportunities for grants and scholarships. Aid is often limited to in-state residents, and some states — such as Washington — will allocate aid on a first-come, first-served basis.

Just as state agencies rely on FAFSA information for determining aid, many higher ed institutions turn to the information to determine what they can provide in terms of their own scholarships, grants, work-study assignments, etc. Some private colleges also rely on a College Scholarship Service (CSS) Profile, which can be completed with the College Board for a small fee.

Last stop: private aid

Several organizations offer scholarships to students based on need and merit, and many high school, college and career counseling offices will be able to inform students of opportunities. Scholarships may be available from corporations, religious and cultural institutions, and professional or service organizations.

Beyond scholarships, families can explore personal loans from a private lender. An applicant’s credit score will determine availability and terms of financing. Private loans may have higher interest rates than government loans, but they may be a viable option depending on a student’s circumstances.

Start planning early

The cost of higher education is significant, but students and families have a number of tools and resources at their disposal to create a financial plan that will see them through graduation and beyond. Get the paperwork organized early, monitor relevant deadlines, and keep an open mind about how offers of aid can fit into a complete financing plan.