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Financing your College Education

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Financing your College Education

From the MCG 2009 edition By Julie Bogart

These days, there's no getting around the fact that college is expensive. According to the College Board's most recent Trends in College Pricing report, the average yearly cost of just tuition and fees at a four-year college or university can range from $13,500 (for in-state students at public schools) to $32,300 (for students at private institutions). Add on books, room, board and other expenses and you could be in the $50,000-per-year range.

But before you let cost discourage you from applying to the school of your dreams, you should know that there is more than $130 billion in federal aid available to students, in the form of grants, federal loans, work-study funds, and education tax credits and deductions. With help from the federal government, as well as aid from state governments, private sources and merit scholarships, it is possible to afford the college of your choice. But how? Where do you even begin?

Mark Rogers, a representative from CitiBank's Student Loan Corporation, says, "There are many different options to consider -- from scholarships and grants to loans for students and parents, each of which [has its] own criteria and timing.”

The Basics

There are two different types of financial aid -- merit-based and need-based.
  • Merit-Based Aid: Merit-based financial aid is what many people refer to as scholarships, awarded to a student by either an individual college or outside organization, without regard for financial need. Students typically receive meritbased scholarships for academic achievements, though some can be awarded for special talents, leadership skills or other personal characteristics; athletic scholarships also fall under this category. At many colleges, every admitted student is automatically considered for the merit scholarships at that school. At other colleges, students must complete a separate application.
  • Need-Based Aid: Need-based financial aid is awarded to a student on the basis of financial need. The Free Application for Federal Student Aid (FAFSA) is generally used for determining federal, state and institutional need-based aid eligibility. At private institutions, a supplemental application may be necessary.

Use Your Merit

Before you delve into the world of need-based aid, find out what merit can do for you.

According to Rogers, students "should always start with ‘free' money, such as grants and scholarships."

Merit-based scholarships usually require very high qualifications with regard to grades and test scores, as well as excellent recommendations and extracurricular/community activities.

It pays (literally) to start searching for scholarship opportunities early. Colleges often list numerous merit scholarships available for incoming freshmen on their websites and in their catalogs. Tina Bennett, director of financial aid at Marymount Manhattan College, says that high-school students should start researching the scholarship qualifications at the colleges they're interested in during their junior year (although, if you think you know where you might want to apply, you can certainly start looking during your sophomore year).

Ask your guidance counselor for a list of local scholarships -- you have a better chance of receiving a local, less competitive scholarship award than a larger, national one. Investigate the merit scholarships offered by your community or state, as well as those from local organizations, such as clubs, businesses, churches, synagogues and other associations. Perhaps there's a PTA scholarship, for example, or a town-sponsored scholarship essay contest.

Then move your search to the Web. Many websites, such as FastWeb's "Find Scholarships" option ( and's "Search Scholarships" option (, can help you locate the types of scholarships you qualify for. While some scholarship requirements are super specific, like you must live on a farm in the South, others, like AXA Achievement Scholarships, are open to students "who've accomplished something exceptional in a job, sport or extracurricular activity," according to Jan Goldstein, the director of AXA Foundation, one of the nation's leading scholarship providers.

A word of caution: As you search the Web, beware of scholarship scams. If a scholarship requires an application fee, for instance, don't apply. Also, make sure the scholarship information you find online is up-to-date, and apply to as many scholarships as you qualify for -- it can't hurt, and every little bit helps.

Chuck Knepfle, assistant provost and director of student financial assistance at Miami University of Ohio, says that because the aid process varies by state and by school, the best source for any student is a college's financial-aid office.

"You don't have to be a student at that college to get information," Val Meyers, associate director of financial aid at Michigan State University, says. "Financial aid staff members are always happy to help."

Some colleges' academic departments offer merit scholarships, according to Meyers. So, even if you don't qualify for a scholarship as an incoming freshman, you may still be able to apply for and receive a scholarship as a college sophomore, junior or senior.

When you apply for a merit scholarship, make sure you're using any separate application that may be required. Include all requested information, such as essays and activities. Some applications may also ask for personal recommendations. When in doubt, include them. And, of course, read and follow the directions carefully.

Loans, Grants and Work-Study

While scholarships are awarded on the basis of merit, loans, grants and work-study are typically awarded on the basis of financial need. Here's what these types of aid are all about:
  • Grants: Grants are awarded on the basis of financial need and do not require repayment.
  • Loans: Loans are financial-aid awards that require repayment. They offer the opportunity to defer the cost of your educational expenses by borrowing now and repaying later (after you graduate). Some loan programs are based on financial need, like federal loans, which offer low-interest rates -- your best option. Other loan programs are available to all students regardless of income, like private loans, which usually have higher interest rates. Many students use federal loans to cover tuition costs, and private loans to cover other expenses, like food, housing and books.

    Some of the more popular federal loans include Stafford Loans, for students, and PLUS Loans, for parents of students.
  • Work-Study: Based on financial need, the Federal Work-Study program provides part-time employment to students to help with college expenses. Non-federal Work-study, on the other hand, is not based on financial need. So, if you don't qualify for Federal Work-Study, you should inquire about non-federal student employment opportunities at your school.

How do you know if you qualify for this kind of aid? Simple. You fill out the FAFSA, or Free Application for Federal Student Aid (, required by all U.S. colleges to apply and qualify for financial aid. Completing the FAFSA means that you'll be considered for aid from the U.S. government, such as the Stafford Loan, PLUS Loan, Pell Grant, Perkins Loan and Federal Work-Study program. State governments and individual colleges also use the FAFSA to assess whether or not you need more financial help than the federal government can give.

If you're planning to attend college in the fall, you should fill out the FAFSA in January. (It won't be accepted before January 1, but get it in as soon as you can after the first.) Because colleges only have a certain amount of money in their financial-aid budgets, the earlier you apply for aid, the better your chances of receiving it.

Unfortunately, the FAFSA may reveal that you don't qualify for as much federal financial aid as you actually need. Don't despair! Private loans, although not as ideal, can help cover your expenses. Financial-aid offices at each school will provide information about their private loan providers, as well as their terms and conditions.

No matter what you do, Knepfle stresses that it's important to understand completely all aspects of each loan you choose to accept, as the terms and conditions of loans vary considerably. And remember that there are always alternative options. "One excellent way to finance [your education]," Knepfle says, "is to work with the school on a combination of loans and monthly payment plans. For

example, a student who owes a school $5,000 could pay $250 a month for 10 months, and then only have to take out a $2,500 loan."

Will I Drown in Debt?

While using loans to pay for college may be necessary, it can also be a little scary. How will you possibly pay it all back?

Relax. While you obviously have to consider how much you and your family are comfortable borrowing, Bennett says that you should also look at college loans as an investment. The investment in yourself will pay off in the long-run -- a college education will help you secure a better paying job, as well as provide you with the continued potential to increase your salary.

"The trick is to borrow only what is needed," Meyers says, "and to live economically while in school, thus minimizing the student's loan debt so that it will be manageable." Keep in mind that repayment usually doesn't

start until after you've graduated, and that you can pay off your student loans over a fairly long period of time. The standard repayment period is 10 years, though you may be able to consolidate your loans and extend the term of your repayment if you need to lower your monthly payments.

According to Brent Tener, associate director of student financial aid at Vanderbilt University, when applying to colleges, be sure to look at schools that vary in terms of cost. "You normally will not know the net cost (the cost of attending a given school minus financial aid), until after you have applied for admission, been accepted, applied for financial aid and been given a notice of your eligibility," he says. "Once you know the net cost of attending each school, you can then evaluate which school would be the best option with all factors (not just financial) considered."

No matter which financial path you find yourself on, remember that paying for college -- even the priciest of colleges -- is doable. Start early, research your options, know what you're getting yourself into, and choose what's best for you and your family.

More on Merit Scholarships

While most merit scholarships are offered by or through colleges themselves, some scholarship sources aren't dependent upon your attendance at a particular school. Check out these nationwide scholarships open to most college-bound seniors:

AXA Achievement Scholarship

The AXA Achievement Scholarship awards $10,000 to 52 students -- one from each state, the District of Columbia and Puerto Rico. From this pool of state winners, 10 are selected to earn an additional one-time scholarship of $15,000 (

Essay Contests

A number of organizations offer scholarships based on essays. For example, the Atlas Shrugged Essay Contest offers as much as $10,000 for a winning essay based on a selected topic related to the novel by Ayn Rand ( The annual John F. Kennedy Profile in Courage Essay Contest offers up to $8,500 to high-school students who submit an original essay about an elected official who has demonstrated political courage ( And, the Green Scholarship awards $500 to students who submit a brief essay describing how they are finding ways to conserve energy and preserve the environment (

Coca-Cola Scholars Foundation

Each year the Coca-Cola Scholars Foundation awards 50 four-year $20,000 scholarships and 200 four-year $10,000 scholarships for use at accredited colleges and universities in the United States. These scholarships reward leadership and excellence as exemplified through academic achievement and extracurricular activities, including commitment to community service (

Davidson Fellows Scholarship

The Davidson Fellows Scholarship disburses $50,000, $25,000 and $10,000 scholarships to extraordinary young people under the age of 18 who have completed a significant piece of work. Application categories are mathematics, science, literature, music, technology, philosophy and "outside the box" (

Siemens Competition

Win scholarship money -- from $10,000 to $100,000 -- by participating in the Siemens Competition. The Siemens Competition seeks to promote excellence by encouraging students to undertake individual or team research projects in mathematics, engineering, the biological and physical sciences, or a combination of these disciplines. You must be a high-school senior to compete as an individual, while the team competition consists of two to three members from any high-school grade level (

Julie Bogart is the editor of My College Guide.

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