In only two short months students all across the United States will be selecting which colleges they will be attending next fall. It's exciting and all the work and worry will be over. Before you breathe that sigh of relief, there is one remaining hurdle to clear, the offer of financial aid. It's important for your future that as you consider what each school has offered you, do so with an eye on your life after graduation.
We hear so often about student debt. According to the Institute for College Access and Success, the average borrower will graduate with $26,600 in debt. According to Pew Research the average college graduate earns $45,500. The rule of thumb is that the debt you take on over the course of your education should not exceed what your earnings would likely be for a person starting out in your field.
In many cases, the parent and the student go into debt when the student enters college. There are separate issues that parents and students should consider as they approach college.
First, determine what is included in the total cost. Not all offers will look the same; all will have a total cost but some include only the direct costs (tuition and room and board) and others will include direct and indirect costs (tuition, room and board plus books, fees, transportation and personal expenses).
The problem is that to determine financial aid, colleges take the total cost (which may or may not include indirect expenses) minus your expected family contribution (EFC) which leaves your need. Colleges then will meet your need in varying degrees with financial aid. If indirect expenses were not included it's a plus for the college but those expenses are still there and you will be responsible for them.
Financial aid is broken down into two categories: self-aid, which is comprised of loans or works study, and gift-aid, which will be in the form of grants or scholarships. When you look at offers of financial aid you need to understand the college's policies on outside scholarships, which will vary from school to school.
Outside scholarships are ones you received from a source other than the college itself. For example, you won a scholarship from your high school. You must let the college know you received that scholarship. What they do with it will make a big difference.
Some schools will apply your scholarship towards replacing the scholarships or grants they were going to give you. In the end, financially, you are no further ahead than you would have been without the scholarship. Other schools will apply your outside scholarship to reduce the amount of loans you are offered. This does save you money and makes the outside scholarship a real bonus to you.
Another important policy you need to know when you think about what your debt load will look like when you graduate is whether or not the college front loads their grants and scholarships. Almost half of colleges front load. Front loading means that they give you a really good offer that first year, but in subsequent years you will be offered fewer or smaller scholarships and grants. So the amount of loans you will be asked to assume will increase as time goes on. This practice makes it difficult to know what kind of debt you will be asked to take on for your entire education.
Finally, if parents are going to take on debt for their child's education they need to think carefully about it as they proceed. The rule of thumb for parents is that their total college debt should be able to be paid off within 10 years. This should include debt for all their children so if parents have more than one child's education to pay for they should keep that in mind as they take on debt.
One plus for parents is that if you have more than one child in college simultaneously, your EFC will be divided by the number of children you have in school. In other words, say your EFC is $10,000. That does not mean you will have to come up with $10,000 for each child. If you have two children in school you'll have to come up with $5,000 for each child with three in school $3,333.33 per child and so on.
Understanding what the policies are at the schools your child is considering is an important first step when you are looking at financial aid offers. The next step is to understand what all the numbers mean. We'll look at that next month.
Average tuition and fees for in-state student: $9,022 in 2011-12 Increased: 20.5% from a year prior and 98.3% from five years prior The worst could be yet to come for students in California's public universities. If California residents vote against state tax increases in the November elections, the school system will have to come up with money fast to fill the $375 million budget gap that would ensue, says Dianne Klein, a spokeswoman for the University of California's Office of the President, which is the headquarters for the 10 UC campuses. Under that scenario, tuition could rise 20.3% for the second semester of the upcoming academic year. Much of California's growing college-cost burden has been placed on out-of-state students. The 10 most expensive campuses for out-of-state students in the U.S. are all in California, where tuition, fees, room and board in total ran up to roughly $51,000 last year, according to the Chronicle for Higher Education. Klein says that despite the rising costs, overall applications to the UC system are going up; she also says that because of the system's financial aid programs, about half of all UC undergrads pay no tuition.
Average tuition and fees for in-state student: $9,428 in 2011-12 Increased: 16.8% from a year prior and 101.7% from five years prior Since 2008, Arizona's public universities have laid off faculty and staff and eliminated academic programs in order to make ends meet. This year, state funding will total $708 million, compared with nearly $1.1 billion for the 2007-08 academic year, says Katie Paquet, spokeswoman for the Arizona Board of Regents. As tuition costs have risen, the largest universities in the state have rolled out lower-cost ways that students can attain a Bachelor's degree. This fall, Arizona State University will open a new campus in Lake Havasu City, where annual tuition for state residents will cost $6,000, nearly 40% less than at its campus in Tempe. Also, Arizona's largest universities -- ASU, University of Arizona and Northern Arizona University -- are offering students who transfer from community colleges a lower-cost way to complete their Bachelor's degree; in some cases, students will be charged the cost of tuition during their freshman year in community college rather than the tuition the four-year school charges when they enter it. "Our goal is to provide more options to students across the state at varying price points," says Paquet. Separately, for the first time in two decades, Arizona State University and the University of Arizona have frozen tuition for in-state undergraduate students for the upcoming academic year. Tuition for out-of-state students will rise by roughly 3%.
Average tuition and fees for in-state student: $6,808 in 2011-12 Increased: 15.9% from a year prior and 74.2% from five years prior Beyond tuition hikes, Georgia college students are also facing cutbacks to a popular state scholarship program. Last year, the state reduced the amount of money it doled out to students through its merit-based Hope Scholarship, amid concerns that the program was underfunded. The program, which used to cover 100% of tuition costs at the state's public colleges for qualifying students, covered roughly 87% last year; this year, as tuition continues to rise, the scholarship will cover 81% to 85% of costs in the university system. The state is also looking at cutting direct funding to higher education. Georgia Governor Nathan Deal recently proposed a $54 million cut through June 2014, which if enacted would reduce spending over that period to roughly $1.7 billion. A decision is expected early next year. John Millsaps, spokesman for the University System of Georgia, says public institutions have had to shift much of the cost burden onto students as state funding dwindles. Over the past seven years, state funding went from covering 75% of the cost of educating students to 50%, he says.
Average tuition and fees for in-state student: $9,484 in 2011-12 Increased: 15.7% from a year prior and 67.3% from five years prior Unlike most states, Washington doesn't have an individual income tax; instead, it relies on sales taxes for much of its revenue. Income from that source slumped during the recession, leaving the state with less money to go around. To make up for the shortfall, the state granted permissions to its public universities to raise tuition, and students have felt the impact: Six years ago, it cost roughly $5,700 on average for an in-state student to attend a public college in Washington. That's hovering around $10,000 this year. In June, the University of Washington announced a 16% increase in tuition and fees for the upcoming year, following a 20% increase last year. The state is covering just 30% of the cost of educating its students, the lowest share ever, says Norm Arkans, a spokesman for the University of Washington. He says the institution's relatively low tuition and fees provided some leeway to raise costs, but adds that the strategy isn't sustainable in the long term.
Average tuition and fees for in-state student: $6,044 in 2011-12 Increased: 13.7% from a year prior and 65.8% from five years prior Few students have been immune to tuition spikes in Nevada. During the five academic years ending this past spring, Nevada raised tuition and fees at its community colleges by 48% on average, one of the highest increases in the country, according to the College Board. Costs at four-year public colleges rose 66% over the same period. And midway through the last academic year, the state approved an 8% tuition increase for all undergrads, which will kick in this fall. Still, despite the increases, the cost to attend a public college in Nevada remains lower than the national average, says Dan Klaich, chancellor of the Nevada System of Higher Education.