Read an Excerpt
TRENT & SEPPY SAY...
Hi, we're Trent and Seppy, and we're here to offer you some straight talk about (gulp!) paying for college. Let's face it: To make smart decisions about how to pay for your student's (or plural, students'!) education, you need more than just wishful thinking. And you don't need to face what may look like an overwhelming maze of forms, loans, tax information, and ever-growing college costs alone. So we created Straight Talk on Paying for College: financial aid and money management strategies you can use written in plain language and presented in simple, step-by-step terms. And we threw in some laughs (yes, it's not all bad news!) to help you through this process. You deserve it!
Want to figure out what the real cost of college will be for your family? We broke down the costs, direct and indirect, including all those "miscellaneous" items you may not have thought of, and asked parents of college-age students -- real people like you -- how they paid them. Want to know how to apply for financial aid and get the best package? We asked financial aid officers at some of the nation's top colleges to tell us. Want tips on saving for college and what tax breaks may be out there for you? We've given you the latest on 529 plans, Education Savings plans, and tuition tax credits. Want to know how to pay the bills that financial aid won't cover? We show you your options for meeting your share -- without going broke.
And of course, we've also included our own personal advice and insights throughout this book. Why should you listen to us? During our careers, we've worked with thousands of families, helping them with financial aidadvice, test prep, and college admissions. Our comments are based on our own experience and what we've learned by speaking to students, their parents, and college personnel throughout the years.
So relax (it's okay!). We'll take you through the steps, with checklists at the end of each chapter to keep you on your way. We'll point out the mistakes that others have made, and help you avoid them. And we'll save you some money, too. Now, that's not bad!
Copyright © 2003, by Kaplan, Inc.
CHAPTER ONE: Getting Started
"One of the most important contacts you can make at your student's college is the financial aid office."
-- Connie Gores, vice president for enrollment, Randolph-Macon Woman's College
Odds are, you've picked up this book because you have a child who's getting ready to go to college. You've probably looked at some schools, flipped through a few college catalogs and viewbooks, and tried to get a sense of what this grand, life-changing experience for your student is going to cost.
Then again, maybe you've been afraid to find out. (If so, we can't say we blame you.) The truth is, there's good news and bad news. Since most people prefer to get the bad news over with, we might as well get that out of the way.
Unfortunately, the cost of a higher education is rising every year and will almost certainly continue to do so in the future. Just as the costs of cars and homes have increased over the past decades, so has the cost of attending college.
(Our apologies if that last sentence was difficult to read, but we promise it gets better.)
THERE IS HELP
The good news is that there's help all over the place if you know where to look. The government, businesses, foundations, and even universities offer ways to help manage and reduce the cost of getting a higher education. Despite the price, there are people who can and want to help you and your student afford college. After all, getting a college degree not only benefits your student, but the rest of society as well.
And lucky you -- you've already found one source of help. This book was created solely to help you and your son or daughter understand and get through the process of finding and applying for financial aid. But before we dive in, there are a few things you should know up front.
GETTING A GAME PLAN
First, this isn't a weekend project. There's a reason we compared college to buying a home or car, and that's because it takes the same amount of time, effort, and planning. Most people wouldn't buy a car without some shopping around and number crunching, and you certainly wouldn't buy a house without doing research. The same should be true for college. Since your student's education will likely cost as much as a new car (or even a house!), doesn't it make sense to put as much time and energy into the process as you would for those decisions?
Also, you'll be glad to know that your student will need to become involved in this process. Although you may claim them as dependents on your income taxes, you can't do this alone. There are going to be plenty of discussions and decisions that will involve talking (gasp!) to your son or daughter. Affording college is about things like budgets, living expenses, and spending money. Getting your student involved will help them realize the financial burden of college. And if you're lucky, they may take their education more seriously as a result.
Finally, this book will encourage you to be proactive. Not only will we explain the process and use the real life experience of other parents to help you understand how it works, but we've created a number of things to nudge you along the way. At the end of this chapter, you'll find a calendar to help pace yourself for going through the financial aid process. While we don't live in a perfect world, it represents an ideal timeline for getting things done. We've also included short checklists at the end of each chapter to suggest things you and your student should be doing along the way. They're by no means comprehensive, but it's a good place to start. A handful of worksheets and tables will help make life easier than guessing and estimating costs in your head. We've also done a lot of legwork to find other resources so you don't have to. Websites, phone numbers, and contacts are plentiful throughout this book, so you'll always have places to find additional information.
YOU ARE NOT ALONE
Remember you're not alone in this process; millions of other American families are going through the same steps and facing the same problems. Even financial aid officers send their kids to college. "My daughter is a senior in high school, and I've been helping her friends' families compare their aid packages," says Connie Gores, vice president for enrollment at Randolph-Macon Woman's College and parent of a high school senior. "There's a lot of confusion and incorrect assumptions out there. A lot of parents also don't understand the differences between a public and private college. Also, I'm learning that a lot of families don't understand the financial aid process, so there really are a lot of people out there that need help and guidance." She adds, "The one thing that surprised me, even being in this field, is the anxiety this process can create. There's an immense amount of pressure on students and families during the whole process, and I never realized it until I went through it myself."
There may be times when dealing with financial aid feels like balancing your checkbook, doing your taxes, and taking a test all at once. Understanding the process is half the battle. When it comes to financial aid, knowledge is power, and this book will give you the information and guidance you need to make the best decisions to help you pay for the best possible education your son or daughter can have -- without going to the poorhouse.
In the next chapter, we'll tackle the reality of financial aid, and separate the myths from the facts (and it's not all bad news!). We'll also discuss some misconceptions to help you learn the truth about financial aid.
Copyright © 2003, by Kaplan, Inc.
CHAPTER TWO: Financial Aid -- Myth Versus Fact
When was the last time you bought something at full price? If you're like most people, the answer may take a little bit of thought. As Americans, we are a nation of bargain seekers and coupon clippers, and as such, companies know that with all the options out there, they'd better give us a good reason to put down our hard earned cash for their product.
It's not surprising, then, that we live in a society of discounts. Televisions and radios bombard us with ads proclaiming "no money down," "no payments for twelve months," or "get 50 percent off." To make things even more interesting, the Internet has become a great tool in increasing people's buying power. Comparison websites and online services mean that hardly anyone need pay full price these days.
And although colleges don't always advertise, a wonderful similarity exists.
Almost no one pays the full cost of a college education, which is a good thing since the skyrocketing cost of a higher education may cost as much as your home. Of course, if you've already seen the figures for your prospective colleges, you're well aware of this. Let's take a look at what drives these rising costs.
WHY IS COLLEGE SO EXPENSIVE?
Over the past few years, our economy has faced increases in unemployment, large drops in the stock market, significant international policy issues, and just about any other type of money problem you could name. As 2003 started, almost every state in the nation faced budget cuts from the federal government. As you're probably aware, this has impacted the amount of money states passed on to colleges. In turn, these colleges were forced to make do with less money by cutting expenditures and raising the cost of tuition and expenses. To make a long story short, college is more expensive than ever before.
But what you may not know is that it's not necessarily that simple. The cost of going to college continues to rise because of a number of factors:
Just as higher energy prices means a higher electric bill for you, colleges are also paying more for utilities. As campuses grow in size and student populations increase, more money is needed for maintenance, food, and housing. And of course, colleges compete for students by offering high quality educations, so any cost that will keep a school competitive is a priority.
As our economy takes a hit, alumni are less likely to donate to their alma mater. Foundations that support universities through regular donations have found themselves with less money to give. Corporations that may support college programs or pay for new buildings have found they can't afford to make such gestures when their business is suffering.
San Diego State University's in-state tuition is $2,014 and out-of-state tuition is $8,902 (2002-3).
CUNY John Jay School of Criminal Justice is $3,309 in-state and $6,509 out-of state (2002-3).
University of California schools have no in-state tuition -- but look out for fees that hike them up to numbers like $4,200 (Berkeley) and $4,378 (Los Angeles).
Berea College is a Christian college in Appalachia which requires all students to work on campus but gives everyone a full scholarship for tuition.
The College of the Ozarks provides mandatory student work and private/federal scholarships to make it "free" for everyone.
Cooper Union students get full tuition scholarships.
At military academies like West Point and Annapolis your degree is "free" -- except for service commitments of five years or more.
Kenyon University $30,330 (2003-04).
Sarah Lawrence $29,360 (2002-3), (George Washington University $29,350, (2003-4).
MIT $29,130 (2002-3).
Washington University in St. Louis $29,053 (2003-4).
Universities need to offer salaries that attract well-established researchers and professors with terminal degrees (Ph.D.s, M.B.A.s, and J.D.s). Just as businesses today need I.T. professionals, improvements in college technology require a knowledgeable workforce to maintain and fix it. Administrative and legal needs continue to grow as colleges must comply with the ever-changing and complex state and federal regulatory requirements. Any addition, change, or improvement to a college results in some kind of increased expense.
And perhaps most importantly, the growing expectations of a higher education push colleges to continue spending. No longer is it acceptable for a college's library to be open until 10 or 11 P.M. Instead, libraries are often open 24 hours a day. Likewise, it's not enough to have each dorm room wired for telephones and dial-up Internet access; when it comes to a college's technology, things like DSL connections are rapidly becoming the norm. "As a college, if you don't offer those things, then you're not able to compete with other schools," explains Karen Krause, director of financial aid at the University of Texas at Arlington. "The expectations are already there. Unfortunately, none of these costs are included in financial aid."
These expectations for improved libraries, athletic facilities worthy of a pro football team, cuttingedge technology, sophisticated laboratories, and top-notch student centers all are causing schools to spend more money each year, as funding from both public and private sources continues to drop. "It's going to get very interesting," continues Krause, "Texas is facing budget shortfalls at the same time colleges here are experiencing growth in enrollment. If things continue, at some point it will have to reflect service." It has already been reflected in tuition.
While all these factors aren't going to affect the process of applying for financial aid, it will be to your benefit to stay informed about them. As someone with a son or daughter in college, things like state education cuts, college programs, and teacher salaries will affect how much you pay for your student's education. And as someone who pays for these things, your opinion matters.
THE MYTHS OF FINANCIAL AID
Have you ever started your car and thought, "I've got plenty of gas," only to have the engine cut off minutes later? How about writing a check as you tell yourself, "There's probably enough in the account to cover it," only to have the check bounce days later?
At one time or another, we've all made assumptions that turn out be wrong, and although you may not realize it, people make assumptions about financial aid that are incorrect as well. Just as bouncing a check can cause frustration and headaches, so can believing these myths. So to save yourself trouble and worry down the road, let's clarify these assumptions.
Do you expect financial aid to pay for everything?
Financial aid is just what it claims to be -- assistance. By assuming that government and state financial aid programs will pay 100 percent of your son's or daughter's education, you're making a dangerous error. The purpose of these programs is to help people afford college, which is completely different from saying, "I can't afford college, so the government will have to pay for it." Parents and students who think this way are in for a harsh wakeup call.
Do you rely on financial aid to afford college?
This is a common assumption, even though most families qualify for some sort of financial aid. The problem is, right now you don't know how much financial aid you'll receive. If you're fortunate, your son or daughter may have a significant amount of their education paid for through scholarships, loans, and/or grants. Other families find that financial aid covers only half, if not less, of the cost of college. So while expecting financial aid is one thing, relying on it to cover the majority of expenses associated with your student's college experience is risky.
"Many families I've talked to don't think about financial aid until after they receive their aid packages," explains Connie Gores, vice president for enrollment for Randolph-Macon Woman's College. "Once they get them, then they want to know how they can get additional assistance. They didn't consider aid as part of the application process."
Do you expect to make a financial sacrifice for your student's education?
Financial aid is based upon your family's ability to pay for school, not how much you're willing to pay. As you'll soon find out, state and federal programs use your income tax to determine how much financial aid you qualify for. To do this, they determine your Expected Family Contribution (EFC) using these numbers. The EFC is your responsibility for your student's education, and financial aid provides assistance in covering part, most, or all of the difference. So even though you may disagree with your EFC, it's non-negotiable. Just as you can't change your tax rate because you need the extra money, you can't change your EFC because you don't have the money handy.
"A big misconception is that your EFC is what you'll pay for college, and that's really not true," says Jade Kolb, manager of financial aid for New York University. "It's a government analysis, and it may be the same as the amount you'll pay, or it could be more or less depending on the school."
The Department of Education is planning to change federal EFC calculation in fall of 2004. Not surprisingly, the change is going to cost you and your student money. See chapter eight for more information on this important development.
Do you assume your financial status doesn't matter to colleges?
The good news is that to some, it does. Currently, federal and state financial aid programs are not able to keep up with the rising cost of education. An increasing number of colleges recognize the impact this has on lower-income families and consider a family's financial status before awarding financial aid. This practice is called "need aware," while colleges that do not use a family's financial status are considered "need blind." Also, many schools that are need blind offer merit-based aid as a way of providing financial aid to top students regardless of their families' income.
The main reason for clarifying these myths is so you won't make any costly and frustrating decisions down the road. The bottom line is, instead of making assumptions about financial aid, you should prepare to contribute as much as you can to your student's education. (We'll help you figure out how to do this later on, so don't worry.)
Colleges are like cars...sort of. Coming to this realization is a lot like going car shopping. You see something you like, you look inside, kick the tires, and maybe take it for a test drive. But once you take a glance at the price sticker on the side window, your heart almost stops beating, you gasp, and begin to wonder just how long it would take to bicycle to work.
It's called sticker shock, and once you see the cost of tuition and board at your student's favorite university, you'll probably feel the same way. It used to be that the most expensive purchases a family could make would be a house and a car. Today, it's a house and college, with a car just behind them. In fact, according to the College Board, which administers the SAT exams, the annual cost of attending a four-year public university in 2002 was $9,663 for a student who lived on campus. Students who lived on campus at a private college averaged $18,273. Multiply that times fours years of school, and you could spend $73,092 on your student's education.
But don't panic. When sticker shock happens to car shoppers, they almost immediately remember their trade-in, which reduces the price of a new car significantly. They also begin deciding what options they can do without -- leather interior, air conditioning, that computer voice telling you that your car door is open. Factor in special rates, discounts, and dealer reductions, and the difference between a car's sticker price and what you'd actually pay can be quite different.
The same is going to be true for college, without the salesmen, balloons, or haggling. Instead of having a trade-in, you and your son or daughter will have financial aid to reduce the cost you're quoted. Just as you may do without leather seats, your son or daughter might be able to do without things like the most expensive meal plan or a telephone in his or her dorm room. Also, discounts and reductions are available to some students in the form of grants or scholarships. So take a closer look at all your prospective colleges, and don't dismiss any one on the sticker price alone.
The Flip Side of the Coin
However, the unfortunate reality for most families is that cost is a very real factor in college decisions. "Wait a minute," you're probably thinking. "Didn't I just read that I shouldn't dismiss a college based on cost?" Yes, you did, but it's important to understand that these two statements don't contradict each other.
Samuel Ellison, a student employment manager and financial aid adviser at Morehouse College notes that it's financial aid that plays a factor in affording college, not cost. If you toss out a prospective school based on cost alone, you'll never find out if your student will be offered scholarships, receive a significant amount of financial aid, or what financial aid doors may open to her. In other words, a college that's much more expensive than your other prospective schools may offer more financial aid to make themselves competitive. But you'll never find out if your student doesn't apply there.
The bottom line is, don't let cost alone keep your student from applying to that expensive school. But once the acceptance letters arrive and you start getting financial aid offers, then you'll have to look at the reality of what your family can afford.We'll go into more detail about this later, but for now, remember to keep your options open.
To wrap up, we began by looking at the current financial state of colleges, so that you'll have a better understanding of why college seems to be so expensive, and why it may keep getting more costly. We debunked a few myths about financial aid, but also looked at how almost no one pays the full price of college. To explain this, we compared colleges to cars, discussing the difference between a "sticker price" and what students and families actually pay. And although cost alone should not keep a student from applying to a school, we acknowledged that it's a very real and important factor for almost everyone when going through this process.
In the next chapter, we'll look at the different college options open to your son and daughter, and discuss the decisions involved and how to factor costs and aid into the equation.We'll look at the different types of schools, including "dream schools" and financial safety schools.We'll discuss how to get your son or daughter involved in all aspects of the decision-making process, including the financial ones. But before you move on, take a look at the checklist for this chapter.
Copyright © 2003, by Kaplan, Inc.