Figuring Out Financial Aid
Compare Costs of Colleges Before Settling on One
March 5, 2009
By Heidi Fletcher
Vice President for Enrollment Management
College of Notre Dame of Maryland
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Ah, spring. A time of rebirth, renewal and financial aid offers. These will start arriving in the mail in mid-March.
The most important thing to remember is not to jump at the largest scholarship offer or what seems to be the cheapest tuition price. You and your family should spend some time understanding what these offers really mean.
The best thing to do is determine the total cost of attendance for each college your child is considering. Grab a piece of paper and start listing figures.
You’ll need to consider tuition, room and board, estimated cost of books (usually $750-$1,000), fees (parking, student activity fees, athletic fees, health center fees, etc.), personal expenses (shampoo, pizza, laundry, sweatshirts) and travel (especially if the school is out of state). Total these items. This is the cost of attendance for one academic year. Most financial aid offer letters list this figure, but it’s important to know what the numbers represent.
Next, subtract the scholarships and grants that your student has received from the college or other sources. Grants and scholarships are free money. The amount of money you have left is what you have to figure out a way to cover.
The government determines the estimated family contribution (EFC) — the amount it assumes can be covered from savings, income and assets that the student and family possess (not that most families can actually cover what they are supposed to be able to — but we’ll get to that in a minute). Anyway, the sum after the “free money” is what we now will work to cover.
Your student may also be offered federal work study. Work study provides an on-campus job that is offered to the student to help offset the cost of attendance. These jobs vary from working in the library to assisting in a research lab. The money earned from these activities is paid in the form of a monthly check and not applied directly to the bill.
If your family has financial need (your EFC is less than the total cost of attendance) then the student is eligible for a federal Stafford subsidized student loan. The government pays the interest (fixed 6 percent) while the student is in college, and the student does not start accruing interest until after leaving school. Repayment starts six months after graduation (or after the student withdraws).
Your student will also be offered a federal Stafford unsubsidized loan (this loan is not need-based) with a fixed rate of 6.8 percent and repayment start date of six months after leaving school. The student is responsible for the interest during the life of the loan.
Perkins loans are need-based and available to qualified students. And you, the parent, can take out a federal PLUS loan (which is for credit-worthy parents). All of these loans are excellent choices that do not require repayment until after the student is out of school. I know many families are leery of taking loans, but it does help a student to build credit and take responsibility for her education.
Next, subtract the amount of federal loans (these will be outlined in your financial aid letter) and federal work study. If you’ve covered the cost of attendance, great! If not, then you still have some options.
Many colleges offer payment plans where you can either break your payments into four or 10 payments over the 10-month academic year (usually for a small fee). This is a great option as it helps you to spread out the costs and plan effectively.
You can also look into loans offered through private lenders (alternate educational loans). You should work with the college’s financial aid office to obtain these loans as there are many scams and some unsavory lenders out there.
It’s important to consider some other things when looking at the bottom line. Your student may be looking at two very different schools - one private and one public. At first, the costs may seem to be quite dissimilar.
However, once you go through the above process you may find that the difference in price is not as great as you thought. At that point, it’s important to determine the “value added” of each school — what it has to offer (small classes, research opportunities, big football teams, etc.) and what is important to you and your child.
Additionally, understand that the average graduation time is closer to six years at most public institutions and four years at many private ones — this will affect the total outlay of money during the student’s academic career.
Estimating the salary that your child will receive post-graduation will help you evaluate what level of investment is appropriate for your family. It often troubles me that a family is willing to put money into purchasing an expensive car or second home but not willing to invest in the education of their child. Look at the big picture when making these decisions. Cheapest is not always the best value.
It’s important to talk with the financial aid offices at the different colleges your student is considering. These offices are valuable sources of information about additional opportunities that arise after freshman year and can help you to find outside scholarships. These offices can guide you through the process and provide you with all sorts of assistance (not just financial).
Involve your student in these financial discussions. This will help her understand the significant investment being made in her — and ultimately make her more fiscally responsible. Financing a college education is truly a family decision, with help from some friendly financial aid officers.
Next month we’ll talk about how to make the final decision on which college to attend and how to avoid some of the intense stress that goes with the decision.
Heidi Lippmeier Fletcher is vice president for enrollment management at College of Notre Dame of Maryland. She has worked in admissions at colleges in North Carolina and New Mexico. Ms. Fletcher holds a bachelor of arts in anthropology from The University of Cincinnati and a master of arts in anthropology/human biology from the State University of New York at Buffalo.
