Unraveling the Financial-Aid Riddle: Programs Help Families Handle Costs of College
Fagan, Amy, The Washington Times (Washington, DC)
A family sits around the table surrounded by college applications and forms. As they wade through the mire of college choices and start to weigh the options, they quickly realize that they do not have the funds to finance college on their own. The cost is simply too high.
Financial aid is complicated and often confusing. What constitutes need? What kind of financial aid is available? What's best for me or my child, and can I get it?
In 1996, the average cost of one year of room, board and tuition at an in-state public four-year college was $7,000, according to the Department of Education. The average cost of the same at a private four-year college was $17,600. The cost of room, board and tuition this year at Western Maryland College in Westminster, Md., is $22,200.
"The cost of running a college continues to rise, so in turn tuition rises as well," says Patricia Williams, director of financial aid at Western Maryland College. "Renovations, salary increases and the constant change of technology all affect this. I cannot imagine college costs not rising every year."
Of the 15 million students enrolled in two- or four-year colleges in 1997, more than 50 percent of them receive financial aid of some kind.
Financial aid is any money that a student receives toward paying educational expenses, says Marjorie Nieuwenhuis in her book, "A Parent's Guide to College Admissions." The bulk of aid comes from the federal government, state treasuries and the college's own funds. Only one-half of 1 percent comes from the private sector.
Federal aid comes in the form of grants, which are gifts that are not repaid; loans, which are repaid by either the students or the parents; and programs, such as the federal work-study program.
Federal Pell Grants range from $400 to $3,000 per year and are available to undergraduate students whose families have low-to-moderate incomes. In addition, there are federal Supplemental Educational Opportunity Grants, ranging from $500 to $1,500 per year, provided for students who are Pell Grant recipients and have exceptional financial need.
"It's hard to say a distinct income range" for Pell Grant recipients, says Jane Glickman, a spokeswoman for the Department of Education. "But generally those within the $40,000 to $50,000 or less combined income range qualify for a Pell Grant."
There are several types of federal loans, explains "The Student Guide 1997-98," which is compiled each year by the Department of Education's Office of Secondary Education. Two examples of loans are the Perkins Loan for undergraduate or graduate students with exceptional need, and the Parent's Loan for Undergraduate Students, or PLUS loan, which has a low-interest rate and is determined by a family's credit history.
Direct Stafford Loans - the most common loans - are funded by the federal government through schools. The Federal Family Education Loan Program is similar, except that the funds come through a bank, credit union or lender that participates in the program.
APPLYING FOR FINANCIAL AID
To apply for federal student aid, a family should complete and return the Free Application for Federal Student Aid (FAFSA).
A financial-aid processor at the Federal Processing System in Iowa City, Iowa, determines the "Expected Family Contribution," or EFC, by looking at the family's income, savings and investments, as well as other information. The resulting Student Aid Report indicates the amount of money that the family is expected to contribute toward their child's education.
The college financial-aid officer subtracts the EFC from the estimated cost of attending that college, minus any scholarships previously received. The result is the financial aid that the student is eligible for. Typically, the lower the EFC, the higher the financial-aid eligibility.
According to "A Parent's Guide to College Admissions," there are ways to "diversify funds" in preparation for the college years. Some families choose to "spend down," reducing their savings in hopes that their EFC will be lower. The book advises that "if you have some cash stashed away, do some home remodeling, buy a new car while your child is a junior in high school, or place more money in a retirement fund."
But honesty is the best policy, Ms. Williams says. When filling out these forms, there is no "ethically good way to maximize financial aid short of lying," she says. "I advise parents to answer questions honestly and be forthright with all of their money."
Congress recently passed new tax measures to assist families with the rising cost of colleges. The Hope Scholarship, proposed by President Clinton in 1996, is designed to help make the first two years of college or vocational school universally available by making most taxpayers eligible for a tax credit of up to $1,500 per year, starting after this December.
Also, beginning Jan. 1, people can make penalty-free withdrawals from IRAs for their own higher education expenses or for spouses, children or grandchildren. In addition, the measures create a tax-free education IRA, which parents and grandparents can use to save for a child's college education.
These measures do have limitations, however, experts say. For instance, the Hope Scholarship is phased out for joint filers who have between $80,000 and $100,000 of adjusted gross income. And the IRA benefits cannot be used in conjunction with the Hope Scholarship.
The Financial Aid Information Page on the World Wide Web (http://www.finaid.com) is a comprehensive resource for financial aid and provides a sample FAFSA form as well as other links and services. Another Web site allows visitors to actually begin the process of application over the Internet, with the FAFSA on line (http://www.fafsa.ed.gov).
In addition to federal aid, there are many college-funded scholarships based on academic achievement, community involvement or leadership roles. Many schools also offer sports or music scholarships. Students should check with the schools they are applying to for a comprehensive list of such scholarships.
"We have students here at Western Maryland who have their entire tuition paid for because of academic scholarships that we offer," Ms. Williams says.
The University of Maryland offers a $1,500 Dean's Scholarship for outstanding freshmen from Maryland. The school also has substantial scholarships for students active in the creative and performing arts.
PRIVATELY FUNDED SCHOLARSHIPS
Privately funded scholarships may not be as substantial as some think.
"Private scholarships make up very little of our students' overall financial-aid package," Ms. Williams says. "Students with a couple thousand in scholarships are the exception."
The Financial Aid Information Page warns: "Beware of solicitations from organizations that claim they can find thousands of dollars in scholarship money for you. They are often scams." Many of these groups are found on the Internet. "A Parent's Guide to College Admissions" suggests checking their legitimacy by calling the National Association of Secondary School Principals at 703/860-0200.
"At best, a handful of scholarships go unclaimed each year because of poor publicity or very narrow eligibility restrictions," says Mark Kantrowitz, author of the Financial Aid Information Page. "It is very rare that a scholarship program does not receive enough applications from qualified candidates."
Experts encourage students to apply for as many private sector scholarships as possible, though.
Mr. Kantrowitz advises students to look for sources of local scholarships, such as the local American Legion or other veterans associations, because these are less competitive than other privately funded scholarships.
The Coca-Cola scholarship program gives 50 $5,000 scholarships and 100 $1,000 scholarships each year, based on leadership, academics and character.
* "College Costs and Financial Aid Handbook" by the College Board. Published every year by colleges nationwide, this handy guide examines the costs of education, the financial aid available and the options that families have.
* "Complete College Financing Guide" by Barron's. This "must have" covers everything in the financial-aid category, including strategies, tips and handy advice to parents and students alike.
* "A Parent's Guide to College Admissions" by Kaplan Educational Center and Simon & Schuster. This is a handy guide for parents to refer to throughout the college process. It covers choosing a school, the application process and many financial-aid questions.
* "Peterson's Scholarships, Grants and Prizes" by Peterson's Guides, Princeton, N.J., 1997. This book lists more than 770,000 awards from 1,900 sources and comes with Windows software that provides a scholarship database. To order a copy, call 800/EDU-DATA.
* "The Student Guide" by the U.S. Department of Education, 1997-1998. This comprehensive assistance guide provided by the government is intended, among other things, to help parents and students become aware of the procedures, nuances and opportunities when it comes to financing higher education. For a free copy or more financial-aid information, call the U.S. Department of Education's hot line at 800/4-FED-AID.
* "Timely Information for Parents and Students" by the National Association of Student Financial Aid Administrators (NASFAA). The "TIPS" book provides information for parents on financing college and is published by NASFAA, which represents student-aid professionals at more than 3,200 colleges and universities nationwide.
* For a general introduction to financial aid, check out the U.S. Department of Education's Office of Postsecondary Education. It also gives detailed information about the 1997 education tax cuts (http://www.ed.gov/offices/OPE/finaid.html).
* A great source for lists of books specifically on financial aid can be found on the Web (http://www.finaid.org/finaid/bibliography/recommended-books.html).
* The Kaplan Student Loan Information Program (http://www.kaploan.com/finaid.html) provides viewers with an outline of the financial-aid procedure, as well as answers to frequently asked questions.
* A fun and informative source for students preparing for college is the College Edge Web page (http://www.collegeedge.com), which provides links to awards and scholarships, answers to frequently asked questions and a chance to chat with other college-bound students. It also has plenty of information on financial aid, banks, lenders and other connections.
* The Financial Aid Information Page is a comprehensive page featuring free scholarship-search databases, links to books and other sources, and a wide variety of financial-aid information (http://www.finaid.com).
* The Internet's largest free scholarship search (http://www.fastweb.com) is accessed by more than 20,000 students daily.…
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: Unraveling the Financial-Aid Riddle: Programs Help Families Handle Costs of College. Contributors: Fagan, Amy - Author. Newspaper title: The Washington Times (Washington, DC). Publication date: November 14, 1997. Page number: 4. © 2009 The Washington Times LLC. COPYRIGHT 1997 Gale Group.