You’ve heard it before. College costs a lot. Over the last decade, average tuition costs rose at nearly four times the rate of family income. And that’s only the beginning. There’s room and board, supplies, personal expenses and plenty of midnight pizzas. Financing takes careful planning and a keen understanding of your options. Unfortunately, books and online resources on the topic can often be confusing and verbose.
Thankfully, there’s no need to spend hours of research trying to navigate the financial aid jungle. This guide is designed to give you a fast but comprehensive financial aid overview. What’s the process? What are your choices? What’s important to consider?
The Typical Application Process
Most people begin their journey by applying for federal loans (Perkins, Stafford, PLUS), which generally have low interest rates and a variety of deferment options.
If you want to apply for any type of federal aid, including scholarships, you will typically need to fill out and submit the Free Application for Federal Student Aid (FAFSA) between January 1 and June 30 to qualify for the following academic year.
Four to six weeks after submitting the FAFSA, you’ll receive a Student Aid Report (SAR) that outlines your Expected Family Contribution (EFC), which is determined by subtracting what you and your parents can afford from the cost of attending your chosen school.
Come April or so, schools will start mailing out award letters indicating the amount of aid for which you qualify.
Easy, right? Not exactly...
Completing the FAFSA can be challenging. If you do not fill it out correctly (and hundreds of thousands do not, according to the U.S. Department of Education) it will be sent back to you, which could cause you to miss the deadline. Plus, you have to reapply for aid every year. Applying late is never a good idea, since financial aid is awarded on a first-come, first-served basis. To avoid problems and delays, start early to give yourself enough time to complete the form correctly.
The Tuition Gap
For those who do receive federal aid, many find that it’s rarely enough to finance the complete cost of an education once you factor in supplies, living expenses, etc. The difference between the amount of financial aid you are offered and the amount of money still left to complete your degree is called "the gap." The gap might mean you have to attend a less desirable school or forego college altogether. Or you might have to change your lifestyle (e.g. work through school, get a second job, eliminate family vacations) to make ends meet.
Maxing out your credit cards, liquidating assets or tapping into your 401K to pay for school is generally not the best solution. Many homeowners consider home equity loans, as they are often tax deductible and usually offer low rates. However, that’s not an ideal solution for everyone.
Are Private Student Loans for You?
When family resources, combined with federal aid, are not enough to pay for higher education, private loans are a practical option for filling the gap. Often, they are the difference between attending your top school and the only one you can afford.
If you have good income and credit, a private student loan might be the ideal way to go. You can start shopping for private student loan offers through TuitionTree, a new service from LendingTree that helps families understand their loan options and compare private student loan offers from lenders.
The Big Financial Aid Picture
Higher education is one of the best investments you can make-one that pays back over a lifetime. College graduates earn more money, have more job opportunities and lifestyle choices, and develop invaluable skills and knowledge they’ll have forever.
Students should have every opportunity to succeed in higher education without having to worry about limited funds. Finding the best method to pay for that education is worth every penny. A private loan program like LendingTree Student Loans can provide the complete financing and peace of mind every parent needs to make sure their children are reaching their true potential.
Content provided by Educap, Inc. Copyright 2005 Educap, Inc. All rights reserved.
Related Articles