How to Leverage Financial Aid to Reduce College Costs
Understand the True Cost of College:
To understand the true cost of college, knowing the tuition price is just the beginning. Tuition (the price you pay for the privilege of taking courses at a college) is the primary contributor to college costs, but it’s important to understand the other costs of attendance. Let’s say you are considering attending a college whose tuition price is $30, 000 per year. In addition to tuition there are fees such as technology, communication fees, orientation fees, health insurance fees, or general fees that are applied to things like student activities. Students interested in certain majors may pay fees associated with that major such as lab fees. These fees could potentially add a few thousand dollars to your college costs.
Will you live on campus or off campus? If you plan to live on campus increase the price you will pay by at least $10,000 a year for room and board (meal plan). On campus accommodations will include your living space. Costs can vary based on the type of space (double room, single, suite, on campus apartment) and will include furniture, cable, internet/wifi, heat/air conditioner, electricity and water. Be sure to examine these costs because sometimes additional “residential fees” are tacked on like a fee to pay for cable and internet. Also, sometimes colleges require students to live on campus for a certain period of time, meaning the housing costs then become mandatory. One important expense category to factor in is the school supply category: books, computer, notebooks, etc. College textbook prices can easily cost a few thousand dollars each year. Your $30,000 per year tuition has now risen to $40,000-$50000 per year or more in total college costs.
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No One Pays the Full Cost of Attendance
Well, very few people do. There are still students who have families wealthy enough to simply write a check for the full amount. Colleges LOVE them, but even they may not be paying the full price of tuition. For example, a wealthy student who qualifies for one of the college’s merit awards will have that amount deducted from his/her tuition bill.
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Sometimes ascertaining what your true college costs will be is like sitting through a smarmy home shopping club sales pitch. “Look at this beautiful diamonique bracelet. It’s breathtaking!! It’s fit for royalty and you won’t find it anywhere else!!”
When colleges quote their costs they can also be very quick to tell you that most people don’t pay that amount because of their “generous college financial aid packages.” In other words, the true cost of attendance is what you pay after your aid package (and whatever else you can negotiate). That’s good news, right? It depends on the financial aid package so it’s important to understand how it works.
What is Financial Aid? How Does it Work?
After students are accepted they will receive a college financial aid package which outlines how much and what type of funding they are eligible for. Students can accept or reject a part or all of a package. Aid will come from a number of sources: U.S. Federal Government, a student’s home state, external scholarships and institutional aid.
1. Federal Aid: Federal Aid comes in the form of grants and loans. Grants are better because you don’t have to pay them back as long as you follow the rules. Grant amounts are established by the government, and are based on criteria such as financial need. Taking out a loan of any kind to cover college costs is never fun but federal loans offer options that are often better than private loans (i.e. generally lower interest rates, partial loan forgiveness for certain careers after graduation, no credit check or co-signer needed).
2. State Aid: A student’s home state may offer college grants. Some grants are awarded only if students attend college in state. Some states have agreements with other states where the grant can follow the student. Check your state agency for more information.
3. External Scholarships: External scholarships are financial awards that students earn or win through organizations like church, Girl Scouts, scholarship competitions etc. They vary in amount and duration. Some scholarships may be a set amount to be used in one academic year, while others provide a set amount for four years, and everything in between. Students are allowed to earn and apply multiple scholarships to their tuition bills to help pay for college costs. Every little bit helps.
4. Institutional Aid: Institutional aid comes directly from the college in the form of scholarships and grants. Common scholarship types include merit awards or academic scholarships.
Colleges determine your award amount based on all of these factors and voila, out pops your college financial aid package. That package only tells you part of the story, however.
Important Things to Know about College Financial Aid:
1. Financial Aid is Neither Equal or Fair
Strong language for sure, but true. A student who is highly sought after will probably have more financial aid negotiating power than other students. Students looking at colleges with enrollment pressures, like if a college is trying to increase its enrollment, could be in a better negotiating position than students attending colleges with long wait lists. Students attending private colleges will have a better possibility of negotiating their aid packages than students who attend state colleges, as private colleges have more flexibility with their money.
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There are some portions of the aid package that you don’t have much, if any control over. Federal or state grants for example follow very strict guidelines. If you meet the criteria, you get aid. If not, you don’t. Appealable issues are very narrow. Any external scholarships obtained must be applied according to awarding foundation. It is very unlikely that you’ll be able turn a one-time award into a multi-year award. You do have control over loans, and your financial aid award may include them. You may accept or decline them.
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Your best bet for lowering your costs is by negotiating for more institutional aid (money that the school gives you). Let’s say when all of your aid (including loans) is factored in, your out-of pocket cost is $3,000 a year. Your financial aid award package includes loans that total $5,000 a year. Wouldn’t it be awesomeness if that loan could be turned into institutional aid from the college? Of course it would. Contact the college’s financial aid office and ask how to file an award appeal. The college may be willing to grant some or all of your request if you can demonstrate a financial need that was not factored in, or if a competing college’s aid package is better and/or you tell the college that you’ll attend another school if your aid package isn’t increased. No nasty tone needed. It’s just business. This works for countless students every year and there is no reason why you should not give it a try, especially if you plan to attend a private college. Other things to keep in mind about college costs and financial aid.
2. Your “Free” Money May or May Not be Granted Every Year
That merit scholarship you received? There are probably academic or other requirements attached. Miss that grade point average by even a little and you could lose your scholarship. It happens every year. Think your government grants are safe? Legislation could pass which reduces or completely eliminates your grant, which means additional college costs for you. A salary raise is something to fist bump about, right? Government grants have strict family income guidelines. Surpass that amount by even a little and you could lose valuable aid.
3. Your College Costs will (Probably) Increase Every Year but your Financial Aid Won’t
Every year college costs across the country increase by a certain percentage. Tuition increases. Room and board increases. Textbook prices increase. Everything increases. Know what doesn’t increase? Your college financial aid award. If you are already receiving the maximum in government grants, you will not receive any additional money unless (by some miracle) the government increases the amount in the overall grant budget. Any scholarships or institutional aid received is a set amount and will not increase just because the college costs increase. What to do? Be mindful of this from the beginning and be prepared to try to negotiate a better aid package every year. You might also want to consider other measures such as graduating from college early or getting a head start on college in high school to reduce your overall college costs.
Financial aid is an important aspect of a student’s ability to achieve the American dream of a college education. Rising costs makes this dream more and more difficult for people to achieve. Doing your homework and taking advantage of all of the resources around you can shave literally thousands of dollars off of college costs each year.