If one or more of your children will reach college age soon, you may be wondering how you will manage all the costs. For many families, a financial aid package provides some level of tuition support in the form of grants, scholarships, loans, or work-study placements. Aid is primarily based on the family’s need. If it is determined that you’re able to afford the cost of college, your quest for assistance may be challenging, but not impossible.
Forms must be filled out in order to assess whether you qualify for aid or not. You can get an idea of your eligibility, however, before applying for aid by using the following formula:
The Five Percent Test
Take 5% of the value of your total family assets (including home equity, savings, and investments) and add this figure to your adjusted gross income (AGI) from last year’s tax return. Divide that result by the estimated, annual cost of college. If the result is six or less, you could qualify for financial aid. If the final number is higher, you may have a difficult time convincing financial aid officers of your need.
No matter what you expect your chances to be, it is still worthwhile to go through the application process. Many different factors enter into the final outcome. Public and private institutions alike offer varying amounts of aid, and you may be pleasantly surprised.
If aid is denied by your chosen institution, there are other options. The Federal government, state government, banks, insurance companies, and religious, ethnic, civic, and fraternal organizations are a few alternative funding sources. The number of Federal aid programs available is encouraging. But keep in mind that potential yearly budget cuts may have an impact on some of the following popular programs, while others may remain unaffected:
Pell Grant—These grants are generally awarded to undergraduates based on need and family income. The size of the grant depends on program funding. The maximum award for the 2015—2016 award year is $5,775, and does not need to be repaid.
Federal Supplemental Educational Opportunity Grant (FSEOG)—Students who receive financial aid from the FSEOG are awarded in amounts from $100 up to $4,000. The award is determined by a student’s financial situation and Expected Family Contribution (EFC). It is eligible for use at approximately 4,000 colleges and universities. The money given by the FSEOG is only available to students who are currently enrolled in school or have already been accepted for future enrollment. For those students currently finishing high school or other courses prior to college, it is important to apply for the FSEOG early due to the length of the application process, and because available funding may be granted before the completion of the process. Like the Pell Grant, the FSEOG is essentially “free money” that does not need to be repaid after student graduation.
Federal Perkins Loan—These loans are generally available for students in exceptional financial need who will be enrolled either full time or part time. The amount an individual can borrow depends on his or her financial situation, the amount of other aid to be received, and the availability of funds at the specific college or career school. A student should apply for Federal student aid early to assure being considered. Due to limited funds, however, not everyone who qualifies will receive a Perkins Loan.
An undergraduate student may be eligible to receive up to $5,500 a year. The total an individual can borrow as an undergraduate is $27,500. A graduate or professional student may be eligible to receive up to $8,000 per year. The total an individual can borrow as a graduate student is $60,000, which includes amounts borrowed as an undergraduate.
Federal Work-Study Program—This program provides an award in exchange for work. The typical school work schedule is about 12 to 15 hours per week (up to 40 hours per week during vacations). These jobs may be on or off campus, but they are generally with a government agency or non-profit organization if they are off campus (under some circumstances, a school may have arrangements with a private for-profit company). While the pay is generally modest, it is at least minimum wage. However, hours and compensation cannot exceed the Federal Work-Study award.
Direct Subsidized Loan—The U.S. Department of Education offers low-interest loans to eligible students to help cover the cost of college or career school. Students may be eligible to receive subsidized and unsubsidized loans based on their financial need.
An undergraduate student can borrow an annual amount of $3,500-$7,500, up to a lifetime limit of $23,000, depending on grade level. For loans first disbursed between July 1, 2015, and July 1, 2016, there is a 4.29% interest rate.
Unsubsidized Stafford Loan—As of July 1, 2012, the Department of Education ceased offering subsidized loans to graduate students. However, unsubsidized Stafford loans are available for eligible graduate students who can borrow up to $20,500 a year, with a maximum total of $138,500.
Direct PLUS Loan—Parents of dependent undergraduate students enrolled at least half-time and graduate students are eligible for this loan. The amount of the loan is generally limited to the actual “cost of attendance” minus any financial aid already received. Parents taking this loan must pass a credit check. PLUS loans have a fixed interest rate of 6.84%.
Some states base their programs not only on need, but also on academic performance. The recipients of state loans generally must be legal residents of the state and enrolled in a college or university within their state. In addition, some states have “reciprocity agreements” with other states. Remember, you may qualify for more aid than you think, and it is always better to apply. For more information, visit the U.S. Department of Education website at www.ed.gov.
See how we interactively help you plan to pay for college. At University Financial Strategies we are focused on helping college bound families be an educated consumer of a college education. We use the College Pre-Approval Process and can help you make smart...
We are just a couple of weeks away from FAFSA being available for Seniors in High school, so I wanted to share a couple of take aways from a research paper put out by Sallie Mae. In the research paper it details how we are paying for college in the US. Specifically...
Related ArticelsWould You Like Help Creating A Plan For Your Child's College Fund Or Your Own Retirement Needs?We Help Families & Individuals Create Financial Plans For Success.Mark Kelly, CERTIFIED FINANCIAL PLANNER™We are recommended by the Dave Ramsey...
Would You Like Help Creating A Plan For Your Child's College Fund Or Your Own Retirement Needs?
We Help Families & Individuals Create Financial Plans For Success.
Mark Kelly, CERTIFIED FINANCIAL PLANNER™
We are recommended by the Dave Ramsey Smartvestor Network
At University Financial Strategies our mission is to help families think beyond just saving for college, but helping leverage strategies that leverage your unique situation to help you save on college costs. We take into consideration topics like specialized college-planning strategies for business owners, planning for financial aid, school-specific scholarships, coordinating college planning with grandparents, cash-flow strategies and options for covering shortfalls, to name just a few.
The information on this site is provided “AS IS” and without warranties of any kind either express or implied. To the fullest extent permissible pursuant to applicable laws, University Financial Strategies, LLC.(referred to as "University Financial Strategies") disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement and suitability for a particular purpose. University Financial Strategies, LLC.does not warrant that the information will be free from error. None of the information provided on this website is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments.
Your use of the information is at your sole risk. Under no circumstances shall University Financial Strategies, LLC.be liable for any direct, indirect, special or consequential damages that result from the use of, or the inability to use, the materials in this site, even if University Financial Strategies, LLC.or a University Financial Strategies, LLC.authorized representative has been advised of the possibility of such damages. In no event shall University Financial Strategies, LLC.have any liability to you for damages, losses and causes of action for accessing this site. Information on this website should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.