By Elizabeth LaScala, PhD
Comparing student aid packages and figuring out the true affordability of any particular college can be both challenging and confusing. The essential first steps are to distinguish quality from quantity (more is not necessarily better) and to separate free money (grants and scholarships) and on-campus employment from loans that must be repaid.
The federal government is the largest source for student financial aid, including these programs (https://ed.gov/programs/wdffdl/index.html):
Pell Grants: Federal Pell Grants are awarded through more than 5,400 participating institutions to students who come from low-income families, typically earning less than $50,000 a year. The maximum annual award, for the 2016-17 school year, will be $5,815. Pell Grants, unlike loans, do not have to be repaid.
Federal Direct Loan Program: These are federal loans that come in two varieties -interest-subsidized and unsubsidized. Subsidized loans are offered based on demonstrated financial need. During authorized deferment periods, interest on subsidized loans is paid by the federal government. Unsubsidized loans accrue interest while the student is enrolled in school. While payment on unsubsidized loans can be deferred until after graduation, accrued interest is added to the loan principal. Repayment of the principal for all loans is deferred while a student is still enrolled at least half-time in an approved educational institution.
PLUS Loans: Due to annual limits on Stafford loans, some parents take out federally guaranteed PLUS (Parent Loan for Undergraduate Students) loans to pay expenses not covered by other sources of aid. Interest rates on PLUS loans are higher than other federal education loans and often exceed the rate associated with a home equity line of credit. Parents may borrow for up to a college’s estimated Total Cost of Attendance (tuition and fees, room and board, books, supplies, transportation and incidentals).
Federal Work-Study Jobs: The Federal Work-Study Program provides funds for on-campus, part-time jobs at more than 3,000 participating institutions. Hourly wages can be no less than the federal minimum wage. Eligibility is based on financial need as well as the number of approved on-campus jobs that are funded through the program. It is quite possible that students applying to college for the first time might be eligible for Work Study at one college, but not at another.
State governments are also a source of need-based scholarships and sometimes loans. Programs vary between states. The website for California’s Department of Education – it may also be called a ‘Higher Education Assistance Authority’ or ‘Higher Education Assistance Agency’ – will tell you more about these programs. Several states also participate in tuition exchange programs where their state colleges will offer discounted tuition or scholarships to students from neighboring states. California participates in the Western Undergraduate Exchange (http://www.wiche.edu/wue).
Colleges and universities are a source of some very generous awards. Most colleges provide student aid packages consisting primarily of loans to students with less desirable credentials and endeavor to attract favored applicants with their own grants and merit scholarships that do not need to be paid back. Many schools also award additional grant money to selected students with demonstrated financial need.
Keep in mind that a college’s initial aid offer may not be its best one. It is not unusual for financial aid offers to be adjusted, especially when there are changes in a family’s circumstances. If an aid package is not sufficient, or the offer is considerably less than other awards, it may be worthwhile to appeal. When appealing, be prepared to explain your rationale along with any relevant changes in your financial situation and/or special circumstances.
Occasionally, families can secure more attractive packages by sharing details of what was offered by other institutions, but the college that makes the more generous offer must be of similar selectivity. These situations should be handled with care and preferably by an expert in college financial aid advising.
For many families, financial aid awards are one of the most important considerations in choosing a college. No student should struggle with excessive debt for years following graduation, nor should parents jeopardize their own well-being and retirement planning to send a child to college. Examine all your options with early and careful research.