Introductory Guide to College Financial Aid
By Colin Craig
If you or your child are considering attending college in the next year or two, this post is for you. Because between classes, extracurricular activities, and senior prom, senior year of high school can be a busy season of life. Amidst all the fun activities, it can be easy to lose track of the college financial aid process. This post shares some tips to guide you on your journey to financing an investment in your child’s college education.
Important Senior Year First Steps
Many students start applying to prospective colleges in the early fall of their senior year, after visiting colleges and taking the SAT and/or ACT their junior year. If you have not visited colleges or taken the SAT and/or ACT at this point, make sure to do so as soon as possible. Many colleges require an SAT/ACT test score as part of the admissions application process, and test scores (along with high school GPAs) will likely have an impact on your financial aid eligibility at the schools you are considering.
Once October of your high school senior year rolls around, it is time to file your FAFSA application for the upcoming school year. In case you missed it, we recently published a guide to filing the FAFSA, which can be found here. Generally, you will first need to be accepted to the college(s) you are considering and file the FAFSA application before you receive your initial financial aid package.
Money for the Taking (Private Scholarships)
Throughout your senior year (or even earlier), it is a good idea to be searching and applying for private scholarships. Private scholarships are oftentimes not associated with the college or university you are attending. Rather, private scholarships are usually offered by nonprofit organizations, foundations, local businesses, and even government agencies.
When I worked in financial aid, I often told students to think of searching for private scholarships as a part time job. For example, if you spend 20 hours applying for scholarships and receive a $1,000 private scholarship as a result, that works out a rate of $50 per hour. Not bad at all!
A few scholarship-search tips to keep in mind here:
- Look out for scams! If a private scholarship application asks you to pay money or asks for your Social Security Number… major red flag.
- Ask your local high school guidance office or local library if they know of any local opportunities for scholarships. You can also google to see if there are any scholarship foundations in your local area.
- Ask the colleges/universities you are considering if they have a list of private scholarship opportunities. Many colleges keep a list of vetted, reliable scholarship opportunities that may be a helpful starting point in your search.
- Use reliable scholarship search websites, such as https://fastweb.com and https://bigfuture.collegeboard.org/pay-for-college/scholarship-search. Keep in mind that the more specific you can be in your search, and the more local your scholarship search is, the greater chance your child will have of being the recipient of the award.
Understanding Your Financial Aid Package
Once your child has been accepted into the colleges/universities he or she is considering and have filed the FAFSA, you will likely begin receiving financial aid packages in late fall or early spring. While your financial aid packages will look slightly different at each school, they will likely include similar components, such as:
- Merit Scholarships – Funding from the college or university, generally based on high school grades and SAT/ACT scores
- Need-Based Institutional Aid – Funding from the college or university, generally based on financial need according to the FAFSA.
- Need-Based Federal/State Grants – Funding from the federal or state government, based on financial need according to the FAFSA.
- Federal Student Loans – Funding that will be repaid to Uncle Sam at a fixed rate after your child graduates college or are no longer enrolled on at least a half-time basis. There are two main types of Federal Student Loans, and you can learn more about them here. You are not required to borrow the loans – it will be cheaper in the long-run to decline the loans – but the federal loans are available if needed.
I recommend comparing each of your financial aid packages against each other to understand your net price in relation to each other. Subtract the various sources of financial aid (including the loans, if needed) from the school-specific tuition, fees, room, and board. If you are like me, you may even want to build an Excel spreadsheet to help keep track of it all, helping you to easily compare apples-to-apples.
Once You Have Received the Bill
Once you have submitted your deposit, and your child has enrolled at a college or university, and registered for classes, you can expect to receive your initial bill (or e-bill) at some point over the summer. If there is a gap between the charges and your financial aid package, there are a few options to consider:
- If you have been saving for college via a 529 plan, you can request funding from your account to cover qualified educational expenses, such as tuition, room, board, and books. It can sometimes take a few weeks for the money to arrive, so notify your college/university that the money is on its way.
- Some colleges offer payment plans to help break the remaining balance into smaller payments over several months. Ask your college for more information if this could be a helpful option for you.
- While it could be expensive to repay in the long run, you can also look into private student loans or the Federal Parent PLUS loan (a fixed-interest loan borrowed from the Department of Education). If you decide to go the private loan route, I recommend asking your college if they have a preferred lender list that you can review. Keep in mind important loan details such as fixed versus variable interest rate, co-signer requirements, and term length of the loan. You may also wish to discuss this option with your financial advisor for some objective advice.
Remember That He is With You
If you or your child are attending college soon, we are excited for you and hope this post can serve as a helpful guide on what to expect financially. If you have concerns about saving for your child’s future college education expenses, please feel free to reach out to Beacon Wealth Consultants as we would be happy to help you plan for this important investment.
And lastly, remember that if you are a believer in Christ, He will never leave you nor forsake you (Deuteronomy 31:8) on this college-planning journey. That is a promise worth staking your hope in!
Colin Craig, MBA is an Investment Associate at Beacon Wealth Consultants where he serves as a member of the investment management team. Prior to working at Beacon Wealth, Colin served as Senior Student Financial Services Advisor at Geneva College in Beaver Falls, Pennsylvania.