College Financing Tips

“How am I going to afford this?” This is a question commonly asked by those looking to further their education. The price tag for higher education is steep and the financial aid process can be overwhelming.
The first thing you need to do when applying for financial aid is to complete the Free Application for Federal Student Aid—or FAFSA. You may fill out a FAFSA online (www.fafsa.edu.gov).

Here are some important tips to remember when completing your FAFSA:

• Complete your FAFSA as soon as possible after 1/1/2006 if you plan to enter school in the Fall of 2006.
  
• File electronically if possible. Paper copies of the form take 4-6 weeks to get processed while electronic forms only take 7-10 days. The electronic form also helps ensure that the information is filled out correctly, since it must be completed before you can advance to the next page.
  
• Make sure to check school AND state specific deadlines. They are usually earlier than deadlines for Federal Aid. Deadlines are the dates forms should be received. Make sure to allow enough travel time for the form to reach its destination before the actual due date.
  
• Respond promptly to any verification requests. Delays could jeopardize your financial aid award.
  
• Some schools require additional forms to be filled out along with the FAFSA. Check with the school that you are attending to be sure that you completed all of the necessary forms.
  
• It is extremely important to make or print copies of EVERYTHING before you send it! Keep a folder of all your financial aid information including forms, tax returns, W-2’s, etc. Having a folder will also make the verification process (if you are selected) more efficient since all the necessary information is in one place.

After you have completed and submitted the FAFSA, a Student Aid Report (SAR) will be generated. A copy of your SAR is automatically sent to the financial aid offices at the schools that you highlighted on the FAFSA as prospects. The SAR shows your family’s Expected Family Contribution (EFC) which assists Financial Aid Offices in determining your financial aid award.

Next, your prospective school’s Financial Aid Offices will send you an Award Letter listing the amount of financial aid for which you are eligible, enabling you to determine the remaining costs. The Award Letter also lists aid programs for which you are eligible including the following:

Federal or State Grants & Scholarships
Grants and scholarships are excellent options—usually based on need and/or achievement—because they do not have to be repaid.

Work-Study
Work-study allows you to have a job while you are going to school. You receive a paycheck that can be put towards expenses such as tuition and books.

Low-Cost Federal Loans including Federal Stafford Loans The Federal Stafford Loan allows students to share in the borrowing responsibility and develop a credit history. Most students qualify for federal loans and there is no credit check or co-signer requirement. You must complete a Master Promissory Note (MPN) and choose a lender when applying for a Federal Stafford Loan. The borrowing limits increase each year you are enrolled.

In deciphering your award letter, make sure to compare the costs at each school (tuition, fees, room and board etc.) with the financial aid package from each school to determine the true cost. Also look at how much aid in each package is “free money” that doesn’t need to be paid back (grants and scholarships) and how much you will need to repay (loans). To get a better picture of 4 years of tuition financing, ask the school if financial aid stays relatively the same from year to year. Inquire about increases in tuition, fees, and room and board. If you received a grant or a scholarship be sure to find out if it is a one-time deal or if it applies to the duration of your enrollment. Are there additional scholarships that may be available in later years? All of these factors play in important role in determining the best value.
When grants, scholarships, work-study and Federal Stafford Loans do not cover the full cost of attendance, it is time to turn to financing alternatives that can help ease the costs. Below are some different options that help fill the unmet need between Federal Aid and the total cost of an education:

Monthly Payment Plans — Some colleges offer tuition payment plans that allow you to spread an academic years’ tuition over several monthly payments. Ask your financial aid office if this option exists.

Parental Loan for Undergraduate Students (PLUS) — The PLUS loan is a federally guaranteed loan based on credit-worthiness, with no debt-to-income ratio guidelines or employment verification requirements. Similar to the Federal Stafford Loan application process, parents and students must complete a Federal PLUS Loan Master Promissory Note and designate a lender. If the loan is approved, funds are made payable to the school and the parent.

Alternative Loan Options — Alternative student loans are private loan programs available to families after all other financing options have been considered. Most loan programs require an established good credit history, therefore a co-signer is often recommended for traditional, undergraduate students. Typically the student can borrow up to the cost of education less any other financial aid. International students can also apply for these loans with a US citizen or permanent resident co-signer. Many lenders offer borrower benefits such as a co-signer release option, no pre-payment penalty and interest rate reductions for payments automatically deducted from your bank account.

Editorial provided by Meghan Stebbins, Marketing Coordinator, Education Finance at Citizens Bank/Charter One.