An important consideration for many families includes financial fit.
Parents and students need to have discussions about what to expect from each other in terms of funding college. In addition, the U.S. government and college financial aid offices have the expectation that parents and students will both contribute to the cost of college.
What will college cost? It depends on the college.
Cost of Attendance (COA) includes:
The COA is often referred to as the "sticker price." Each college has a different sticker price, and few people pay the actual sticker price, regardless of whether or not they apply for financial aid.
NEVER ELIMINATE A COLLEGE FROM YOUR LIST BECAUSE OF THE "STICKER PRICE!"
You can get a rough estimate of what the Federal government expects you as a parent and/or student to pay (Federal Methodology of calculating need) by completing this federal online calculator.
Cost of Attendance - Expected Family Contribution = Demonstrated Need
Using the Federal Methodology, the student's Expected Family Contribution (EFC) would not change for any college. However, the demonstrated need would change because the cost of attendance is different for every college.
There is nothing universal about the cost of college. Each individual college sets the cost of attendance and awards financial aid based its own institutional priorities.
You can find an estimate of what a college will cost by finding the net price calculator (NPC) on each college's website. Usually the NPC will be found on the Financial Aid page of the college.
The Federal Methodology is one of two ways colleges calculate EFC. Colleges that use the Federal Methodology typically leave students with a "gap" between the financial aid award and the cost of college. Further, the Federal Methodology includes a limited scope of family assets.
Some colleges also require a student complete the CSS Profile. Schools that require this additional information use the Institutional Methodology to calculate EFC (and therefore financial need). Here is an in-depth explanation of how the Institutional Methodology works. EFC calculated using the Institutional Methodology changes depending on the college, unlike with the Federal Methodology.
Most colleges do not meet 100% of Demonstrated Need. To determine what percentage of need your schools of interest meet, go to www.bigfuture.org then search for each school and look at Paying/Financial Aid by the Numbers. Schools that meet 100% of need tend to be highly selective (admitting fewer than and use the Institutional Methodology to calculate need.
SCHOLARSHIPS AND GRANTS
This form of aid can come from the federal government, state government, college, private or non-profit organization and never has to be repaid.
Scholarships: Merit Aid
Awarded by colleges (as institutional aid) or external organizations in recognition of student achievements (academic, artistic, athletic, etc.). Students may or may not have to apply for institutional aid. Many colleges automatically consider students for merit aid and use scholarships as a recruiting tool.
Students need to check whether they need to file a FAFSA or additional scholarship application in order to be considered for merit aid at any given college. Scholarships may or may not be renewable.
External scholarships typically require an application. Note that receiving external scholarship money may reduce the amount of institutional aid a student is awarded.
Grants: Need-Based Aid
This form of aid is based on family income and assets. Pell grants are a form of federal need-based aid. Many colleges also award institutional grants to high-need students. Note that the student may have to repay grants if they withdraw mid-year.
This form of aid is money borrowed by either the student or the parent for costs associated with college.
Federal student loans are an entitlement of every undergraduate U.S. student or permanent resident. The student is the borrower and does not need a cosigner. Currently a freshman can borrow $5,500 in federal student loans. Students with financial need might be awarded a subsidized federal loan where the federal government pays the interest on the loan while the student is in college.
Parent PLUS loans may be taken out by parents to pay for college. Parents should shop around to compare the interest rates of PLUS loans versus those they might receive through banks or other lenders.
Private loans can be taken out by either the student (with parents as cosigner) or the parent through banks or other lending agencies.
Some states also offer loans through their state higher education organization. Here is an example: Pennsylvania.
Some colleges offer opportunities for Federal Work-Study, where students work a part-time job during the academic year. Work-study is awarded based on financial need as part of a students' financial aid package but the money must be earned through work and is typically used for expenses beyond tuition and room and board.
There are (potentially) three forms required for financial aid:
There are some colleges in the U.S. that don't accept federal aid and therefore require students/parents to complete the institution's own aid application.
There are specific things that students and parents can do to reduce the cost of college:
Students who earn their best possible grades and prepare for standardized tests will have more options and may be more likely to receive merit/institutional aid at colleges where they are accepted (see the Glossary below for definitions of these terms).
Parents can consider the excellent advice on maximizing financial aid eligibility from FinAid
The financial aid process has a number of unique terms. I suggest you review this Glossary of Key Financial Aid Terms as it is a very useful reference.
Opens October 1 for students starting college the following year, must be completed by June 1 the same year student starts. Families report income two years prior to the year student enters college.
The CSS Profile opens October 1 of the year before you will attend college. Most selective colleges require this financial aid form if you are applying for aid.