With college admission season fully underway, college-bound high school seniors and their parents are making important decisions that will affect their financial lives for years to come.
According to the College Board, families with students who are enrolling in undergraduate studies this year (more than 17 million of them) will be paying, after adjustments for inflation, 35% more than those who enrolled a decade ago.
These stats show just how challenging it can be to fit paying for college into a family's finances.
To help make the process smoother, we consulted with college financial planning pros to create this handy month-by-month guide of money landmarks families should be preparing for through the spring.
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Get started with a free financial assessment.
January: Don’t Wait Another Minute—File Your FAFSA Today!
First of all, if you haven't had an honest money talk with your teen about what you can and can't contribute, you need to do that now.
“It’s a conversation parents should start having with their kids as early as the ninth grade,” says Felicia Gopaul, CFP®, a financial planner who specializes in college financial aid. “It shouldn’t be a surprise to students what parents can afford.”
Then, make sure you complete and submit your FAFSA (Free Application for Federal Student Aid)—or the College Scholarship Service profile, if it’s a private college—ASAP. Financial aid season officially started on October 1, a new change for the 2017–18 school year and beyond.
You know the saying, the early bird catches the worm? That applies here too. The sooner you file, the higher your chances of securing a larger share of the financial aid jackpot, Gopaul says.
In 2015–16 the government awarded $28.2 billion in Federal Pell Grants to undergrads. State grants totaled $10.4 billion, and institutional grants came in at $43 billion. Naturally, explains Gopaul, more of this grant money is available at the start of the financial aid season than toward the end. Some schools even have a first-come first-served policy, so once the money runs out, it’s gone.
It is important to complete the FAFSA even if you don’t think you’re eligible for aid, Gopaul says, and be sure to fill it out every year you have a child in college. Just because you didn't receive aid one year doesn’t mean you won’t the next.
Extra Tip: For parents worried that having a lot of cash in the bank will reduce their child’s financial aid package, there are ways you may be able to improve your eligibility—such as timing any big purchases for before you fill out the FAFSA, if it makes sense for your family’s financial situation.
While the FAFSA now asks about your income from two years prior to the academic year to which you’re applying, one thing that stays the same is that it asks about your assets as of today. “If you have any big expenses coming up, like if you have to buy a new car or put a new roof on the house, it makes sense to pay for those before you fill out the FAFSA,” notes Shannon Vasconcelos, a college finance expert at College Coach.
Something else to keep in mind: Students’ assets are weighted more in the FAFSA formula than parents’ assets, so it may be better to save money in the parent’s name. If there are savings in the student’s name, you may want to spend down that money first during their college years, says Vasconcelos.
February: Find Your Scholarship Matches
Now that you’ve submitted the FAFSA, check with the schools to make sure the application forms were received. Once you get your Student Aid Report (SAR) in the mail, double-check every single detail for accuracy. Even a single piece of incorrect information can affect your aid eligibility.
You can also encourage your student to use this financial aid limbo time to research private scholarships. Ideally, this search will have been happening long before senior year, but it is still worth pursuing now. Run searches on sites such as Scholarships.com and Fastweb.com to find scholarship matches, says Vasconcelos, but be aware that the competition will be fierce.
“Nowadays, with the Internet, scholarships are almost too easy to find,” she says. “They get lots of applications, making them harder to win.”
Extra Tip: To improve your odds, have your child ask their high school guidance counselor about any community-based scholarships.
“Even though they’re usually not for huge amounts of money, they tend to be easier to win because the applicant pool is narrowed down for you,” Vasconcelos says. You can also check with your employer or any clubs and community organizations you or your student are a part of to see if they offer scholarships for the college-bound.
Finally, don’t stop looking for scholarships once your kid steps foot on campus. They’ll likely have more resources with the school to find and apply for scholarships tailored to their areas of study.
March: Grab Your Calculators! It’s Time to Compare Financial Aid Letters
The good news: By March you should’ve started receiving some college acceptance and financial aid award letters in the mail. The bad news: Now you have to do math.
“March is the big time to be comparing all of those offers, which can sometimes be tricky,” says Vasconcelos, who suggests setting up a spreadsheet to help you stay organized. “There tends to be not much standardization between award letters from schools, so it can be like comparing apples with oranges.”
Here are a few key steps to take:
Evaluation Step 1: Distinguish between grants and loans, because it’s not always obvious, says Mark Kantrowitz, a financial aid expert and author of “Twisdoms about Paying for College.” “If need be, contact the school and ask them what everything is,” he says.
Evaluation Step 2: Calculate the actual sticker price. Be sure to count everything—tuition, fees, room and board, transportation, books and supplies, and the like—to determine the total cost of attendance, Kantrowitz says. Try to think of all potential expenses—including the fact that your student might not like eating in the campus cafeteria and end up eating out. "A $10 pizza a week for four years is $2,000 of pizza," says Kantrowitz. If that pizza is bought with student loan money, it could end up costing about $4,000 with interest accounted for. "That’s an awful lot of pizza,” he says.
Evaluation Step 3: Subtract the amount of gift aid you’ve been awarded from the total price tag. That’s your net price, or how much you’ll be paying out of pocket. It’s important to run the numbers for all four years of college, not just the first year, so you can get a clearer sense of the total financial fit of each college.
Evaluation Step 4: In the case of scholarship awards, be sure you and your student understand the requirements for renewal. “Usually you have to maintain a certain GPA, take a certain number of credits, stay in a certain activity. Make sure you understand the requirements so you can also understand the bottom line cost for all four years,” says Vasconcelos.
Extra Tip: Some financial aid packages will include need-based work study programs for those who qualify. This is a good opportunity to have a frank discussion with your child about whether work study is the right option. Realize this money is not given in a lump sum, but rather earned throughout the year like a job, so it’s best used as pocket money or for extra living expenses rather than helping to pay tuition at the beginning of the semester.
April: Ask for a Discount
Life can throw you some serious curveballs. Maybe since you filed your FAFSA, your family lost some of its income, or someone was let go or fell ill. There are a million things that can happen to suddenly change a family’s financial situation.
Here’s a little-known secret: You can go back to the schools to appeal any financial aid award or negotiate any scholarship offers. That’s right—you can ask for a deeper discount.
“If you have any special circumstances, you should let the school know and ask them to reconsider a financial aid offer,” says Vasconcelos. “Even if you simply have better scholarship offers from one school over another, you can absolutely go back and say, ‘Hey, School X, thanks for this $5,000 scholarship, but School Y offered me $10,000. That’s kind of hard to turn down. Is there anything you can do to be a little more competitive and make it more feasible for me to attend your school?’ ”
And sometimes, the schools will come back with a better offer. “I find that parents and students are surprised at how often schools are willing to show them a little bit more money if they think that it will be enough to lure them away from another school,” says Vasconcelos.
Plus, the worst they can do is say no.
Extra Tip: If you already have a student in college, don’t forget to see if you’re eligible to claim any tax credits on your federal return, like the American Opportunity Tax Credit, worth up to $2,500 per eligible undergraduate student each year for four academic years.
May: Make a Decision
Most schools require students to put down a deposit by May 1, so you and your teen will have to choose which school to attend before the end of April.
At this stage of the game, you can start evaluating your loan options, if necessary.
According to a report by the Project on Student Debt at The Institute for College Access & Success, seven in 10 college seniors who graduated in 2015 had student loan debt averaging $30,100, up 4% from the Class of 2014.
For the most part, Vasconcelos and Kantrowitz say federal loans are generally a better option than private loans, though you should always shop around and compare to make the best decision for your needs.
Obviously, it’s important that you don’t borrow more than you can afford to pay back, but what’s a reasonable amount?
Consider that by the time your student graduates, some experts recommend that their monthly debt payments shouldn’t be more than 30% of their income. “However, that includes all their debt—student loans, car payments, credit cards,” Gopaul explains. “Don’t borrow so much that [your student] can’t launch into adulthood, which means being able to pay for a first apartment, rent, car payments, all those sorts of things.”
Another good rule is that your total debt at graduation should be less than your annual starting salary at your first job, offers Kantrowitz. “If your total student debt is less than your income, you’ll be able to pay back the student loans in 10 years or less,” he says.
As for parents taking out loans? “Make sure you don’t cosign or borrow so much that you’re affecting your lifestyle,” Gopaul advises.
In other words, parents shouldn’t borrow so much that they hold off on retirement to repay their children’s student loan debt. And speaking of retirement, experts agree dipping into nest egg funds to help pay for college is a no-no. Not only would your retirement be at risk, the money would also count as income, affecting the amount of potential aid received.
Extra Tip: If you are going to be putting other children through college, remember that May 29 is 529 College Savings Day. Many states offer a tax deduction for residents who use their state’s 529 college savings plan, and some will also run promotional offers on 529 Day.
June: Help Your Kid Get Their Summer Job Going
Your teen has his grants, scholarships and loans in place. But there’s still more your soon-to-be freshman can do to help pay for college. Summer’s a great time to earn some extra cash with a part-time job.
It’s important to get students involved in the process, see the numbers and take ownership of certain college expenses, Gopaul says, adding that the earlier children have a grasp on financial literacy, the better off they’ll be at managing finances when parents aren’t around to help.
Before students head off to college, it’s also wise to set up budgetary guidelines and a weekly communication schedule to keep the money conversation going.
Extra Tip: “Learn to live like a student while you’re in school,” says Kantrowitz, “so you don’t have to live like a student after you graduate.”
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