High school seniors and their parents are thinking past Homecoming to college going! This is the moment when families should start strategizing for college applications and financial aid. A quiet family discussion and a meeting with the high school guidance office can avoid tears and recriminations later.
The money discussion: A reality check
The starting point revolves around how much parents can afford to contribute toward college. Recent headlines about the long-term burden of student loans and interest should make everyone aware of the magnitude of this obligation.
Start by searching the website of each school you are considering for its COA — cost of attendance — figure, which includes tuition, room and board, and fees. Add to that the cost of travel, and an allowance for spending money. Now you have a big round number.
Then multiply by four!
Your student may be shocked if you tell them this total is more than the initial cost of your house. Or if you remind them that to save $100,000 to pay for college, you have to earn around $130,000 — before taxes! Now, you’re all ready to face reality.
The college search
An in-state school will likely cost less, all in. But don’t give up on out-of-state schools when it comes to applications. Many are now searching for a more diverse student body — and for ways to fill their freshman class. In fact, some schools might offer some merit aid on top of federal student loans if they are truly interested in your child. But that comes later.
The first step is to come up with a realistic list of schools. That includes not only checking the average SAT score of their incoming freshmen, but also the costs involved. Parents should meet with high school guidance officers now, as the process begins. They know which schools are likely to accept your child, and which schools are a “reach.” Apply anyway.
Consider visiting the most affordable nearby schools on a fall football weekend. If your child falls in love with an in-state campus, you’re in luck. An early decision application might also garner more financial aid from that school.
Financial aid
This is the third element of the college search — finding the money to make it happen. This year the dreaded FAFSA form (Free Application for Federal Student Aid) is being downsized, with the number of questions reduced from 108 to 46! It will focus more on income than on assets. The changes should result in more financial aid, as the EFC (expected family contribution) is replaced by the SAI (student aid index), which allows more of a family or student’s income to be shielded from the calculation. Sadly, it eliminates the benefit for families with more than one child in college.
But the transformation of the application is taking extra time. The FAFSA form for 2024-25 (the year today’s seniors will start college) won’t be available until December 2, 2023. Then you will find it on the government’s website, www.StudentAid.gov. (If your child is already in college, you can still submit the form for financial aid for this fall and winter semester at the site.)
Alternative borrowing to fill the gap is getting more expensive these days. Parent Plus loans come with a 4.22% origination fee (deducted before the loan is disbursed) and a 5.3% current interest rate (this year). Home equity loans carry even higher rates. An alternative might be one year of community college and living at home — if you are sure all credits will transfer later.
Working Lunch
Search for free money
Fall of senior year is prime time to start searching for grants and scholarships. Websites like Scholarships.com and FastWeb.com make the search easy. Their marketing partners will send you offers for everything from student credit cards to dorm room accessories. But if you fill in the forms completely, you might also uncover scholarships for which you qualify based on a parent’s employment or on your family surname.
Most free money is distributed on a first-come, first-served basis. The grueling applications require essays and activities. If your child is a high school junior, it’s not too early to start the search.
Twenty years from now, few employers will care what school you graduated from, but 20 years from now, you’ll just be paying off those loans. Now is the time to make sure they were worth the cost.
That’s The Savage Truth.
(Terry Savage is a registered investment adviser and the author of four best-selling books, including “The Savage Truth on Money.” Terry responds to questions on her blog at TerrySavage.com.)
©2023 Terry Savage. Distributed by Tribune Content Agency, LLC.