Read those letters carefully to understand what’s really being offered.
by Anne Vaccaro Brady
With some acceptances in hand, your high school senior has probably started receiving the coveted financial aid package from those colleges. Though schools all work off your Free Application for Federal Student Aid (FAFSA), all financial aid packages are not created equal. Read on to learn the differences.
Scholarships and grants These are either merit-based, recognizing your student’s academic success, or need-based. Scholarships and grants do not need to be repaid.
Scholarships and grants, particularly merit-based ones, usually come with conditions, like maintaining a certain grade point average, full-time student status, a program of study, community service hours, etc.
Check the length of the scholarship—the best ones are guaranteed for four years or eight semesters.
Work study Students deemed eligible for this program can apply for specific campus jobs and work up to 10 hours a week to make money to help pay for tuition, but usually it’s only enough to help cover books and other incidentals.
Loans Available to both students and parents, loans must be paid back. Different loans have different repayment start dates and terms.
Before deciding to go the loan route, consider how much debt you want your student saddled with after graduation. The general rule of thumb is borrow in total no more than your expected first year salary.
If you plan to borrow, determine the amount you can reasonably afford to pay back and how quickly. Note: if your student leaves school early for any reason, your loan repayment starts immediately.
Types of loans:
Federal Perkins Loan: Available to the neediest students, this federally-issued loan has a fixed interest rate. Students begin to repay the loan directly to their college nine months after they graduate or leave school. They have up to 10 years to pay it back.
Direct Subsidized or Unsubsidized Loan (also called a Direct Stafford Loan): Federally funded, this loan is available to most students and offers a lower annual fixed interest rate than what’s offered privately. A subsidized loan requires no payment, either of the loan or interest, until a student graduates, leaves school or attends part-time. An unsubsidized loan requires interest payments while a student is still in college.
PLUS Loan: The Parent Loan for Undergraduate Students allows a parent or legal guardian to borrow money for a student’s education. These are fixed rate, federal loans that require payback either while a student is still in school or after he leaves or graduates. The interest rate is higher than on student loans and home equity loans.
Understand what you’re being offered A private university gave our son what appeared to be a very nice package, looking only at the bottom line.
Carefully reviewing the details of the package, we discovered that he was awarded a $12,000 merit-based scholarship, a $2,500 work-study grant, and a $5,500 Direct Loan , and we were eligible for up to $25,000 in a PLUS loan. What looked like an almost full-ride to this $50,000 a year college was anything but.
You don’t have to accept everything offered Our kids accepted their merit scholarships, but did not check the online box for their Direct Loans, for which they are still eligible.
Review college costs carefully We appreciated the colleges that gave us a detailed breakdown of their estimated annual costs which included tuition, room and board, books, incidentals (i.e. snack foods, toiletries, entertainment), fees (for such things as labs, campus buses, the health center), and travel to and from campus for breaks. This is a more realistic way to look at college costs, because you need to budget for more than tuition. To get a closer look at the cost of attending a particular college, check the institution’s net price calculator.
Comparing offers Determining the best package can be challenging. The school that seems to be giving you the most may be offering you the least when you factor in the total cost of attending that college and whether the bulk is in scholarships or loans. You want the majority in scholarships or grants.
Make a chart or a spreadsheet with the details on all of the offers to easily compare them. I’ve come across two worksheets that should simplify this for you. Use this one from College Board or this one from Bankrate.com.
When the package isn’t enough If your teen really wants to attend a specific school, don’t be afraid to ask the financial aid office for more assistance. The worst they can say is no. Be upfront about a parent being laid off or unable to work due to illness. Share info on other financial aid offers to find out if this school is willing to match it in terms of your final cost. I know several parents who’ve called or written to a college asking for more money and received it.
Financial aid packages are tricky, so review each one carefully.
Please share your own advice and experiences with financial aid packages in the comments section below.