Paying for College – Know Your Options
The Cost of a College Education
According to the College Board (a non-profit college advocacy organization), the average cost of a year’s tuition at a public four-year college was $7,020 for the 2009-2010 school year. Private four-year colleges fell significantly higher on the financial scale, with costs averaging $26,273 per academic year. Multiply these costs over four years and add in fees for room, board, books and other supplies and you’re looking at a significant financial investment for a college education these days.
But don’t be alarmed if you don’t have hundreds of thousands of dollars in your bank account to cover college expenses. There are a number of different programs available to help cover some – or all – of these costs. Let’s look at some of the most common.
Need-Based Financial Aid
Once you commit to a college, they’ll review the “Estimated Family Contribution” number listed on your FAFSA (Free Application for Federal Student Aid) and compare this to the cost of their tuition. If the amount your family is expected to contribute is lower, the school may offer you a financial aid package containing some or all of the following options:
- Federal grants – Federal grants, like the Pell Grant or the Academic Competitiveness Grant, are gifts of money from the government that do not need to be repaid upon graduation. They range in size from a few hundred to several thousand dollars and are typically restricted to certain groups. The Pell Grant, for example, is only offered to undergraduate students in specific income brackets.
- Federal student loans – Federal student loans, on the other hand, must be paid back after college, although the interest rates on these loans are usually very reasonable. There are a number of different programs available, such as the Federal Stafford Loan and the Federal PLUS Loan, as well as federal loan programs for parents.
- College scholarships/grants – Most colleges administer a wide variety of scholarship and grant programs, including funding for specific demographic groups or a history of academic merit. You may be considered for some of these programs automatically, while you’ll need to request others – be sure to speak with a financial aid counselor to find out which scholarships or grants you may be eligible for.
- Work-Study funding – The Federal Work-Study program offers students part-time employment as a way to help with college expenses. Typically, you’re offered a specific dollar amount; it is then up to you to find a job and ensure that you don’t work more hours than your award will cover.
Private Funding Sources
If the aid package your college offers still isn’t enough, don’t worry. You still have several options for funding your college education.
- Private scholarships – There are many hundreds of private groups that offer college scholarships, from professional organizations to major companies to local and national charities. Your high school or college can help you determine which programs you might qualify for, and a little time spent searching the Web should turn up several more promising candidates.
- Private student loans – Private student loans are generally less desirable than federal loan programs as their interest rates are often substantially higher, but they can be used as a funding source of last resort if you aren’t able to come up with enough money from other programs.
One word of Caution
Student loans can’t be discharged in a bankruptcy, so you’ll be stuck paying them off no matter what. Take the time to calculate what your estimated post-college monthly payoff amount will be so that you don’t take out more money than you’ll be able to pay back later.