We’ve been talking about different arrangements that allow you to pay for college. However, even if you can get the finances to work out, you should first take a moment and ask yourself, “Does it make sense for my child to go to college?”

College is more mainstream today than it has ever been in history. But just because a route is mainstream doesn’t mean you should pursue it (it doesn’t mean it is a bad choice, either). There are alternatives. Some key options are vocational school, trade school and entrepreneurship. Here are some prime scenarios for when these alternative options might be worth looking into:

1.Your child doesn’t perform well in the traditional school environment.

2.Your child is interested in entrepreneurship, is creative, works hard, and has outstanding self-discipline.

3.Your child is interested in technical and/or artistic fields, such as programming or graphic design.

4.Your child has no clue what he/she wants to do or is still extremely immature.

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Usually when people think of financing college, their minds go first to scholarships. I hope you understand by now that there are a wide range of other options that should be examined closely as well. However, people still tend to focus on this branch, so we will give you an overview of the process and recommendations for securing funding for your college endeavors.  We will first discuss strategies for approaching scholarships, have a discussion about the three major categories of scholarships, and finish with a look at some of the resources available to you in your search.

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Okay, so you buy some exotic fish from the pet store and bring them home. What do you do next? Fill the tank straight from the tap and dump in the fish? That does not result in healthy fish. You will want to learn the best environment for your fish and try to create that environment.

Fortunately, children are usually more tolerant to changes in their environment than aquarium fish are, but the change from a home environment to a college environment can be damaging to a student’s spiritual, physical, emotional, financial, and even academic health. What can be done to help your student thrive?
Consider three options to shape your student’s college environment: minimize the change, control the macro environment, and control the micro environment.

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Grants are financial awards that are similar to scholarships. They are given out by the federal and state governments as well as individual colleges, and they do not have to be paid back. The defining point for most grants is that they are based on financial need as demonstrated by your FAFSA. This is the case for all federal and state government grants and about 2/3 of college grants. Identifying the types of grants and eligibility is an important step to understanding the means available to finance college.

I.Federal Government Grants

The federal government gives out grants every year with the awards based exclusively on demonstrated financial need as determined by the FAFSA. There are several grants available, and here is a brief discussion of each:

1.Pell Grant: The foundation for most federal grants is the Pell Grant. The Pell grant is given annually and is based exclusively on financial need. The maximum award amount for 2012 is $5,550, but that level award is almost exclusively for low-income families.

2.Federal Supplemental Educational Opportunity Grant (FSEOG): Families who qualify for the Pell and have exceptional financial need as based on the FAFSA (have the lowest EFCT) have the possibility of receiving additional grant money ranging from $100 to $4,000 per year.

3.Teacher Education Assistance for College and Higher Education (TEACH): This grant is for students pursuing an educational degree that intend to teach in elementary or secondary schools in areas that serve low-income families. There are strict requirements for this grant that can be found at www.studentaid.ed.gov. The grant is an annual award of up to $4,000.

4.Iraq & Afghanistan Service Grant: This is a grant for students who do not qualify for the Pell and had a parent or guardian who died in military service in Iraq or Afghanistan after September 11. Award amount can be up to $5,500.

NOTE: The Academic Competitiveness and SMART Grants are no longer available as of July 2011.

Some individuals take issue with accepting government money to pay for their education, and whether you accept any is a decision your family will have to discuss. Many times college tuition numbers are inflated, specifically taking into consideration that students will be receiving grant money.

All of the federal grants depend upon completion of the FAFSA. For more information see our recommended resources at the end of this chapter.

II.State Grants

Many states also have their own grants. The requirements for these vary dramatically from state to state and can be based on financial need and academic merit (test scores, GPA, class rank, etc.). In some states, these grant funds can be taken anywhere; in others there are specifications that the funds be applied only towards in-state public schools or in-state colleges or universities, public or private. You can learn what state grants are available to you by contacting public colleges or the Higher Education Agency for your state. A reference for all these agencies can be found in the resources at the end of this chapter.

III.University Grants

Private grants are the least known option and come directly through the individual colleges and universities. The structure and requirements for these grants differ greatly from school to school and in some cases can be virtually identical to scholarships. In a majority of cases these grants take into account financial need and are essentially a way for schools to discount their tuition to make attendance possible for the students they want.

Most of the time, university or college grants do not have any additional application requirements other than the admissions application and completion of the FAFSA.  They inform you of what grant amount you qualify for on the Student Aid Report they send you each year (starting in the spring of your high school senior year after acceptance).

The emphasis on need and the lack of a separate application are the two major factors that differentiate college-supplied grants from scholarships. It is important for you to know what is available as it can very dramatically impact the actual cost (versus sticker price) of attending a college.

Recap: Grants, whether from the federal government, state government or the college you attend, can play a crucial role in your overall college financing package. As a general rule, these are monetary payouts that are awarded based on financial need, not academic merit (though there are exceptions). Many people don’t realize that many grants come from the individual institutions themselves. Visit the financial aid office at the schools you are considering to find out what grants they have available.

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A recent (2011) article by Boston University Professor Laurence Kotlikoff sparked considerable debate with the take-away that a person is better off financially becoming a plumber than getting a college education. (Actually, the argument was made that throughout his lifetime a plumber has more purchasing power than a Princeton graduate!) The study takes into consideration lost earnings, tuition, and the fact that bankruptcy does not eliminate student debt loans. Yes, the Princeton graduate will make more money, but he starts from a deep hole.

Does this mean that most should not go to college? The chat associated with this article was highly skeptical, but without logical reason. Other studies have shown no financial advantage for the student who pays more to go to a big name school and no advantage for the graduate degree over the undergraduate. The plumber even wins against an MD general practitioner, with much less risk and stress in the bargain!
Can this be true? Can a skilled tradesman out-earn a college-educated person over their lifetimes? The answer is “yes” if we consider the retail price of college, lost earnings during the college years, the high price of living away from home, and especially a non-economic choice of degree majors. However, not everyone pays retail for college, lives away from home and chooses a degree that will not have a return.
There are non-economic reasons for considering college, but it is interesting to note that many students claim to be going to college for financial reasons. This begs the question, “Why are you considering college?” The financial and time investments required for a typical college degree warrant merit careful consideration of that question.
In future articles, we will examine answers to the question, “Why are you considering college?” We will address financial as well as non-financial answers.

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America’s position on a college education has changed. What once was a rather exceptional route pursued by a highly motivated group has now become mainstream. Tuition has grown twice as fast as inflation, and the end result has been outrageous student debt. Total student debt in America exceeds $1 trillion. Two thirds of all college students graduate with some level of debt averaging over $25,000 a person. Is that a trend you want to follow? Is a college degree really worth going into substantial debt?

The Dangers of the Debt Cycle

The danger of debt is greater than most people realize. It’s not just a matter of paying off $25K over the next few years. There are numerous obstacles to repayment and dangers that young, inexperienced students do not take into account, including:

• Interest compounded over 5, 10, 15+ years is more than most students realize.
• The job market is rarely as good as you initially think, especially compared to what colleges tell you. They have a vested interest in having graduates from all their programs, not just the ones that are demanded by the job market.
• Even if jobs are available, the ones that typically pay the “advertised rates” needed to pay off loans usually require long hours, are difficult, can be less desirable morally, and generally are not the kind of jobs that have the qualities that drew you to the field in the first place.
• The fields that do pay well are usually difficult and require extreme dedication during college. The kind that is commonly your first declared major before you decide to change.
• Debt in college often initiates an unhealthy view of money that ends up costing them much more over their lifetime.
• Successful repayment of student loans typically requires you to live well below the lifestyle of your peers, demanding extreme financial self-discipline and determination which are qualities directly opposed to the habits you started by going into debt.
• Debt leads to stress, broken marriages, depression, more debt, and a host of other costs not accounted for in that “small” initial number of $25,000.
• Around one third of all students who take out loans will end up defaulting which destroys your credit and rapidly compounds your financial problems.

Convinced yet? There are numerous other reasons, but this should be enough for you to question the wisdom of the route taken by most American students.

The Structure of Federal Loans

Hopefully I’ve scared you away from wanting to learn any more about loans, but if I haven’t, here are the details on available federal options:

1.Federal Perkins Loans

These are the best federal loans out there, as far as loans go, but are typically only available to students with substantial financial need. The low interest rate (currently around 5%) does not start accruing until after graduation, and you have nine months after graduating, leaving or dropping below half-time status before you have to start making payments. You can currently borrow up to $5,500 a year for undergraduate studies, and the loan is made through and paid back to your local school.

2.Direct Stafford Loans

a.Subsidized

The better of the Stafford Loan options, subsidized loans are available to students with demonstrated financial need (based on the FAFSA). The advantage here is that the subsidized loans do not accrue interest while attending school. The loan amount you are eligible for varies based on whether you are a dependent or not and what year of school you are in. You can borrow a maximum of $23,000 in subsidized loans which you must begin paying back six months after graduating, leaving, or dropping below half-time status. The current interest rate for these loans is 3.4%. Stafford and PLUS loans are made through the U.S. Department of Education and repaid through a loan servicer.

b.Unsubsidized

A substantially more expensive option that is available to all students, unsubsidized loans begin accruing interest immediately. The loan amount increases annually, like the subsidized loans, with a current maximum combined Stafford debt amount of $31,000 (up to your cost of attendance minus any other financial awards). You must repay this six months after graduating, leaving, or dropping below half-time status, and the current interest rate is fixed at 6.8%. Based upon school arrangements, you have 10-25 years to repay the loan.

3.Direct PLUS Loans

Direct PLUS loans are a federal program that makes student loans directly to parents. The loan amount available is equal to the cost of attendance minus any other financial aid that has been offered to the student. PLUS loans begin earning interest immediately, with the current interest rate being fixed at 7.9%, making it the most expensive federal loan option. It is worthy to note that PLUS loans cannot be transferred into the name and/or responsibility of the student.

Other Options

There is also the option of taking out private loans. With current low interest rates (that, in some cases, may be lower than federal Student Loan rates) this can be an appealing option. Historically, however, these loans have been more expensive and might go up if not fixed like federal loans. Plus, private loans have substantially more limitations and fewer leniencies than federal loans, making them as a general rule more expensive. Situations vary based upon the dealer so make sure to do your research up front.

Is It Really Worth It?

That’s a hard question to answer and varies for your situation. In general, I would say “NO” wholeheartedly. Debt is often incurred because a student was unwilling to: pursue a cheaper educational route, work to seek out other options (or get a job to pay for college), or wait till he/she had a better idea of what degree or major to pursue (resulting in attending college before they were mature enough and extending the number of years it took to finish). All of these are good reasons to hold off and re-evaluate. Studies show that college rankings have little to do with eventual earned income. This means that the extra cost of an elite school will likely not earn back the extra debt the reputation incurs. Give some hard thought and prayer to the topic, thoroughly exhaust your alternative options, and make sure loans truly are your wisest route before proceeding.

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Office supplies are a relatively small portion of the college budget, but there is still money to be saved in wise shopping. Office supplies for college can be divided into several categories: paper supplies, desk supplies, and computer supplies. we will discuss required paper and desk supplies and how you can be UniversityReady wisely.

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Chances are you have heard about the FAFSA (Free Application for Federal Student Aid). There is a lot of confusion surrounding this application and how it is used that I would like to clear up here.

What is it?

The FAFSA has become the foundational tool used by most colleges and universities to evaluate your financial standing.  You must complete the online application during the spring of your student’s high school senior year and again during the spring of each year in college. The information you enter on the FAFSA is based on information you file on that year’s taxes.

Your FAFSA, EFC, and COA

The FAFSA produces a number (called your Expected Family Contribution or EFC), which is used by the federal government, state government, and individual colleges to determine your financial situation and ability to pay. Each college then has it’s own Cost of Attendance (COA) which is a number based on the tuition, fees, room and board, transportation, and book costs to attend that school. Each school then takes your Expected Family Contribution, subtracts your Cost of Attendance, and the resulting difference is what is known as your demonstrated financial need. As you can see, this number will be different for each school based upon their own COA.

How is it used?

Your demonstrated financial need is used to determine how much you are awarded in federal loans, work study, state grants, university grants, and some scholarships. You receive a Student Aid Report (SAR) from the government detailing what your EFC is and then individual financial reports from each school with details on what need-based financing you are eligible for. Contrary to its name, the FAFSA is used for much more than federal student aid and is utilized by most colleges and universities to determine scholarship and grant awards.

What is taken into consideration?

The FAFSA takes into consideration several factors, including:

• Income
• Family size
• Number of children in college
• Savings (excluding retirement)

You might be wondering, “if they take savings into consideration, does that mean saving for college decreases my financial need?” Sort of. Savings, including college saving plans such as a 529, do decrease your eligibility for financial need. However, they only plan on you putting a set percentage towards college each year (which varies based on age of the parents), and an allowance is deducted automatically from the calculation. Ultimately the impact is relatively small, so don’t let this deter you from saving.

CSS Profile

About 270 private schools choose to use the CSS/PROFILE, provided by College Board, to either supplement or replace the FAFSA in their evaluation of your family’s financial situation. The CSS asks more questions and digs deeper into your financial situation than the FAFSA. The biggest difference is that the CSS counts your home equity against you. For many people this means you will be expected to contribute more; however, it also means that the financial counselors evaluating you as a potential student have more resources to be able to evaluate your individual situation and provide university resources accordingly. There is a fee to complete the PROFILE (for more information see our resource page at the end of the chapter).

Recap: The FAFSA and/or CSS/PROFILE are critical parts to the process of applying for and securing financing, not just loans but also grants and scholarships. The FAFSA produces an estimate of how much you can contribute to your child’s education (your EFC), which when subtracted from the cost of attending a school (COA) gives you your demonstrated financial need.

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Electronic texts are the future. Which reader should I choose to take advantage of the benefits of electronic texts?
The options for eReaders fall into several categories: laptop, ultrabook, netbook, tablet, dedicated reader, and smartphone.

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You may be in the position where you are able to pay for your child’s college out of pocket. However, if that were the case, chances are you wouldn’t have needed this book. Parents, there is no requirement in that elusive “parenting manual” that you must pay for your child to attend their private college of choice. You don’t have to pay anything and, in most cases, you shouldn’t. Do your child a favor and let them know now that adult-level responsibilities are around the corner, and it’s high time they got serious. Let them know that you will not be footing the bill and help them through the process of locating a job to begin saving for college early.

Don’t be afraid to draw a hard line on this. If they don’t have enough money, they wait to enroll until they save enough. This might turn a four year degree into a 6+ year degree, but the approach is an education in itself. Your child will likely perform better in college because they realize fully what it is costing, will be motivated to get a degree so they can move up from flipping burgers, and will already have a leg up on competition because of their work experience once they do graduate.

But…

HESITATION: If I don’t pay, then my child won’t go, and their employment opportunities will be severely limited!

RESPONSE: The fact is, your child’s financial opportunities could very likely be hurt even more if you enable them to live 4 years in the “adult world” with minimal responsibility. See what a few years in the workforce will do to their incentive. They just might become convinced that college is worth it after all and develop the maturity to apply a good work ethic in school.

HESITATION: If my son/daughter has to work, then their grades will suffer!

RESPONSE: Not necessarily. Numerous studies show that students who work part-time while attending college generally do better than their non-working counterparts. And some studies indicate that students who work full-time end up with the same grade point average as students who do not work.

Job Possibilities

Even working a 20-hour job at minimum wage during school and full-time during the summer could fully pay for tuition at almost any public college and many private colleges. The closer you can get to a job in the field you are pursuing, the better, as you increase your hands-on education, ensure that the field you are majoring in is a career you actually want to pursue, and pay for college, all at the same time.

If you have the option for work-study, take it! You will be notified of this on the student aid report you receive from your school (see the next chapter for more details). This route can have a variety of advantages, including:

• Money received through work-study is already accounted for in your financial aid package, so your other awards are not reduced.
• If you put forth the effort, it is often possible to get work on a research project or in some other capacity related to your major, allowing a broader educational experience while working.
• Many of these jobs can be relatively easy work, and they will always be flexible around your class schedule.
• The hourly rate you receive from this kind of work is usually higher than what you would typically be able to earn through a normal job.

Another option is entrepreneurship or freelancing. If you have specific skills (good with computers, graphic design work, musical talent, etc.), you can use the internet and other tools to market those abilities and work for yourself as a freelancer or contract worker. You can list your skills on sites such as Craigslist, Elance, Guru, etc. (see our list on www.UniversityReady.com). Working in this capacity often pays well, is extremely flexible, and provides great experience.

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