Financial Aid Insights from Education Experts (Or, how safe-driving, redheaded vegetarians can pay for college)
Oct 01, 2017 11:11AM
By Jennifer Monahan
Shady Side Academy students
In February 2017, Forbes.com listed total student loan debt in the United States at $1.3 trillion—higher than credit card and auto loans, and second only to mortgage loans. Pennsylvanians ranked second in the nation for highest average student loan debt ($34,798) per student. Affording college is no easy task, and understanding the financial aid process is key to avoiding becoming a statistic in the student loan crisis.
Lauren Lieberman, director of college counseling for Shady Side Academy, explained, “The reality is that most families, even from middle class, upper middle class, or affluent families, cannot afford to annually write a check for the full cost of attendance.” With some private college tuition costing more than $70,000 per year, Lieberman said it is impossible for most families to afford college without varied sources of funding.
Those sources typically include scholarships and grants (money that does not have to be repaid), federal student loans, parent contributions, student contributions (including on-campus, work-study jobs) and sometimes private loans.
Robert Clemens, assistant director of financial aid at La Roche College, said that the starting point for the financial aid process, regardless of where a student plans to attend college, is the Free Application for Federal Student Aid (FAFSA). Available on October 1, the FAFSA takes about 30 minutes to complete online. That process will result in each student receiving an Expected Family Contribution (EFC), the magic number that each school will use to determine its financial aid package.
Clemens said that every student who applies for admission to La Roche is encouraged to file a FAFSA, and that a majority of La Roche’s students are eligible for some form of federal aid.
Ann Snyder, director of college counseling at Oakland Catholic High School, said that over half of U.S. college students receive some form of financial assistance.
Government loans are limited to $5,500 per year for freshmen, funded through the Federal Department of Education. Sophomores, juniors and seniors are eligible for slightly more; students must complete a new FAFSA annually. In addition to federal loans, students may apply for private loans.
Lieberman said private loans are a last resort because interest rates are typically higher. Students are rarely successful in securing private loans on their own because they have no credit history and little to no income, Snyder explained. More commonly, parents will apply for PLUS loans (either on behalf of their child or as the co-signer of the child’s loan); interest rates range from 5.7 to 12.9 percent.
Another possible avenue for funding, according to Linda Trautmann of North Districts Credit Union, is for parents to take out home-equity loans to help pay for college. Because interest rates are typically better than PLUS loans (a five-year, fixed-rate home equity loan is currently 3.49 percent), some families opt to go that route. Although many families do use a home-equity loan to help pay for college, Trautmann said that she encourages students to explore all avenues for grants and scholarships before taking on debt.
Massive debt can prevent students from getting mortgage or car loans later in life, so families should not enter into borrowing lightly. Clemens said that he encourages students to borrow the least amount of money they need. “You have to educate yourself and make an informed decision,” he explained.
Both Lieberman and Snyder said that the most important thing high school students can do to prepare for the financial aid application process is to work hard to earn high grades and strong standardized test (SAT and ACT) scores during high school to make them eligible and competitive for merit-based scholarships. Lieberman recommended that students apply for as many private scholarships as possible.
Resources like www.fastweb.com and www.petersons.com can be helpful for identifying scholarship sources. Clemens encouraged students to maximize their scholarships in order to minimize their need to borrow. While many people are familiar with uber-competitive programs like Coca-Cola Scholars, Snyder recommended that students consider lesser-known scholarships likely to have fewer applicants. She encouraged students to be aware of local service- and community-based organizations that often have money to give and difficulty identifying applicants.
Scholarships are available for things that may surprise people, Clemens said. As an example, he mentioned the National Don’t Text and Drive Scholarship, where students sign a pledge and fill out a short application form. The sponsors randomly select a participant every other month to receive a $1,000 college scholarship. Scholarships exist for vegetarians, people with red hair and students working on research related to paranormal activity. Clemens and Snyder said students should be wary of scholarship applications that charge a fee. “Why pay money if you are actively seeking money?” Clemens asked.
Whether students will utilize scholarships, loans or on-campus jobs to help pay for college, Lieberman encouraged families to start planning early and to have open conversations about expectations and finances.
“The most difficult situations I have faced are when this conversation wasn’t happening,” Lieberman said. “It may not be comfortable at first to talk with your kids about money, but when it comes to their college education, these are very important conversations to have.”