Funding higher education without higher anxiety

Jan 12, 2018 | Education

We get it — finding cash to pay for incessantly rising tuition fees can be stressful. These days your child’s education could end up costing more than your house! Even those overachievers in your prenatal yoga class saying they’ve already started saving may not have college covered by the time their little geniuses turn 18.

No need to panic, though. Whether you’re able to save religiously or not at all, you’ll find plenty of cash for college if you know where to look.

According to a College Board study, 59% of students look at the average yearly tuition before deciding whether to even apply.1 Big mistake. Savvy families rarely pay that sticker price, and you shouldn’t either.

4 main sources of financial assistance for covering college costs

1. Federal government (37% of aid awarded2)

Many families assume that private scholarships make up the largest source of cash. Not so much, actually. More of that cash for college can come from the federal government. To find out whether your child (or you) qualifies for grants or loans, and to determine your Expected Family Contribution (EFC), submit the government’s Free Application for Federal Student Aid (FAFSA®). Public libraries and high schools often offer a free walk through of the application if you’re looking for assistance filling it out.

The EFC calculator uses your family’s financial data to arrive at the sum you are expected to contribute toward your child’s college tuition. Your income, assets and family size are all considered in this estimate, so if any of these factors are about to change, describe your circumstances to appeal and potentially lower your total.

2. Colleges (41% of aid awarded2)

Private colleges offer impressive awards in the form of tuition discounts to students at all income levels. To stay competitive with their less expensive state counterparts, they offer nearly 85% of their students some form of assistance.1 The average tuition discount at private schools is 51% off the sticker price1 and can tap down even more if:

  •         you have an exceptionally high financial need (household income below $60,000).
  •         you have an exceptionally accomplished student (top 5% of their class).

Private institutions try to attract coveted, high-achieving teens with grants because they also compete amongst themselves for prestigious rankings. Some of the most expensive and respected universities can end up costing you less than a state school! Likewise, less selective schools will also offer discounts to above average students who will improve their ratings.

Pro tip: Throughout your child’s high school summers, plan your vacation itineraries around potential campuses so your teen can gradually and joyfully discover strong interests and preferred learning environments. Plus, not having to transfer your student in the middle of their undergrad degree will save you lots of money. 

3. State government (8% of aid awarded2)

Painted faces and flagship jerseys blowing in the tailgating party wind may be a blast, but make sure the Big Ten bang is worth the buck. State schools may have lower sticker prices, but they also offer less financial aid. When you submit your FAFSA form, you will automatically be considered for both federal aid and, if you’re a resident of Illinois applying to an Illinois college, the State of Illinois Monetary Award Program (MAP) grant, along with many other grants for specific demographic groups (Veterans, children of police or firefighters, etc.).

Though states typically offer discounts to a smaller percentage of their student body, they are willing to cut their price for applicants who need financial help, and are just as motivated as private colleges to award scholarships to affluent students. The Illinois Student Assistance Commission is the state’s financial aid center which administers all state educational programs, including both need and merit-based aid at state-supported universities.

4. Private scholarships (14% of aid awarded2)

Oh, the places you could go to snag a private scholarship! From the Rotary Club, to the JFK Foundation, to the injury law firm, to the local trucker’s union. These donors seek to support bright students with very specialized interests — ambidextrous trombonist, anyone? Research the terms and conditions of each application to determine whether the time it takes to apply is worth the potential reward.

The average private scholarship is worth about $2,5001 — that’s a lot of essays to pour out of your heart if you’re trying to cover a serious chunk of your education. There are only about 250 private scholarships out there that cover all college costs and they must be applied for every year. High school counselors and librarians are good people to ask about more attainable local scholarships. Also check with your employer — if your company doesn’t yet offer a scholarship it may create one. Once you have applied to a school, confer with each admissions office about their policies concerning the combination of private scholarships and financial aid. Some helpful, well-organized sites that compile private scholarships are: ScholarshipPoints, Cappex and Scholly.

Next step: student loans

If after chasing down all that aid and scholarship funding you still come up short, you will not be alone. About 70% of graduates from four-year colleges have student loan debt.3 According to the Federal Reserve Bank of New York Consumer Credit Panel, the average amount borrowed is $31,333.3 Depending on your income and assets, the US Department of Education offers between $5,500 and $12,500 per year, per student, in Direct Subsidized Loans and Direct Unsubsidized Loans.3 And if you demonstrate financial need, the government will pay your child’s interest while they’re cramming and carousing through four unforgettable years.

Student loans are often not enough to cover the skyrocketing costs of college, so parents increasingly need to take out their own loan to pay the balance. As interest rates are driven by dynamic markets, private student loans are becoming more popular. The new tax bill Congress passed in December 2017 still allows borrowers to deduct up to $2,500 annually from interest paid on student loans toward reducing their taxable income. Check out our competitive variable rates and collateral-free borrowing


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