College Funding 101
By David Keegan
You have a child who is approaching college
age and now you have to face what you’ve been
trying to avoid for years: how to pay for
that college education! Most parents remember
when college tuition, room and board could
be had for under $5,000 per year. Now, the
price of many private institutions hovers
at (or above) $30,000 per year. Multiply that
times four years and we’re talking about a
home mortgage rather than an education! Before
you are tempted to send your son or daughter
straight to the work world, there are some
basics of financing a college education that
you need to understand.
According to the Higher Education Act
of 1965, which is the law that governs
student aid, it is the parents responsibility
to educate their children beyond the 12th
grade. Most importantly, the law also
states that if a family can demonstrate
need, then the government will assist
in paying for such an education. How is
need determined? The basic formula is
simple:
Cost of Attendance - Family Contribution
= Financial Need
Cost of Attendance - The first component
of determining your financial need is
to determine the cost of attendance. The
financial aid administrator at each college
develops an average cost of attendance
for different categories of students.
This will include tuition & fees,
room & board, books, transportation
and miscellaneous expenses. Bear in mind,
this cost can vary somewhat for students
in different situations. For example,
the New Jersey student attending college
in California will obviously have higher
transportation expenses than the California
student attending the same college.
Family Contribution - The next part of
the formula is the Expected Family Contribution,
or EFC. It is determined by the need analysis
methodology as prescribed by federal law.
The EFC is the amount you will be expected
to contribute towards your student’s educational
expenses during the academic year. It
must be recalculated every year. The Free
Application for Federal Student Aid (FAFSA)
is the method used by most colleges for
gathering the personal and financial information
necessary to calculate your EFC. This
method takes into account your income
and liquid assets which, theoretically,
could all be available to pay for college.
One point to be aware of is that your
family’s EFC does not vary with the number
of students in school at one time. There
was a time where I thought it was a good
thing that my kids were spaced four years
apart. Now, I realize that did not work
to my advantage in the college funding
game! So, for the parents who will have
multiple students in school at the same
time, this is very good news. Many colleges
have financial aid calculators on their
web sites which can give you an idea of
what your EFC will be.
Financial Need - So, let’s do the math.
If your daughter applies to a school with
a $30,000 cost of attendance and your
EFC is $16,000 per year, your financial
need is $14,000. This need can be met
by a variety of federal, state and institutional
grants, federal work-study monies and
low interest student loans. Of course,
you will want to look for colleges which
have a history of giving good financial
aid packages which may even be above your
calculated need.
Other Items to Consider -
> Avoid the scholarship search game.
Of the $117 billion in financial aid available
in 2004-2005, less than 1% came from private
scholarships (most aid comes in the form
of the aforementioned grants, work-study
programs and loans). Many families waste
a lot of time and effort going after that
small slice.
> Always apply to at least four to
six schools that are rated equally. This
way, if your child gets accepted to them
all, you may be able to negotiate for
a better financial aid package. Don’t
be afraid to appeal for a better financial
aid package!
> Increase your income! Obviously,
even with the financial aid that is available,
college will still be a stretch for most
families. You may want to consider starting
an on-line business. There are many people
supplementing their incomes on the internet.
Stay away from get-rich-quick schemes
and do your research first!
Dave Keegan works full-time as a systems
analyst for a large corporation and has
quality ideas for helping people get started
in internet marketing. For more information,
visit: http://www.dkeeganonline.com
Article Source: http://EzineArticles.com/?expert=David_Keegan
