It's not too late to seek aid for college costs
By Gail Marksjarvis
Published August 13, 2006
You might weep the day you leave your son or daughter in a college dormitory for the first time, but wait until you take a look at the first bill for tuition, room and board.
You could be moved to a different kind of tears.
About this time of year, that bill arrives. And it's a shocker: Maybe $20,000 for some schools, to be paid right then and there. And that's just half of it. Around New Year's, its mate will arrive.
But there are ways to get through this trauma--to break it down into more manageable pieces.
-- Discovering free money
Last spring, when the financial aid offer arrived empty--or small--you might have thought the matter was settled. You knew what you were going to have to pay, it wasn't pleasant, but that was that.
Many people believe the financial aid letter is the last word on whether you will get any kind of help paying for college. But you'd be making a mistake to assume the door is shut--even now. That's especially true if your family income is low, and your child has qualified for a Pell grant.
Typically, these grants--or free money--from the federal government are available to people with incomes under about $40,000. If you qualify and haven't sought a Pell grant, you can still go to the financial aid office and ask for one.
But if you've already been offered a Pell grant, you may be able to obtain even more aid. The federal government is introducing two new scholarships this year. Students entering their first year of college can receive up to $750 in an Academic Competitiveness Grant. And students in their second year may land up to $1,300 if they have maintained at least a 3.0 grade point average.
Students in their junior and senior years may quality for another $4,000 each year through a National Science and Mathematics Access to Retain Talent Grant, or SMART grant.Both new grants go to strong students, and are provided in addition to a Pell Grant of up to $4,050 a year. The higher the cost of a school's tuition, the higher the Pell Grant.
To qualify for the Academic Competitiveness Grant the first year, a student had to go through a "rigorous high school program." There are guidelines at www.studentaid.ed.gov, but colleges are still interpreting them, said Carl Buck, vice president of college funding solutions at Peterson's. He suggests students assume they are eligible, request a grant from their college financial aid office, and --if necessary--ask a guidance counselor from your high school to state you've had a rigorous education.
To get the SMART Grant, you need to study math, science, computer or engineering, or a foreign language that's national-security related, Buck said.
"But run, don't walk to your financial aid counselor," said Buck, a former college financial aid officer. "March in and say: `How do I qualify for this grant?'
"He notes that low-income families are sometimes reluctant to ask for aid, but more affluent parents push hard and often get more as a result. "You must be assertive," he said.
If you are affluent and have been denied aid, Buck said scholarships may be available.
Frequently, merit scholarships are handed out in the spring to incoming freshmen when accepted to college, but in summer or fall some recipients opt for other colleges. That means scholarships become available to students who had been denied.
"I always tell students to introduce themselves to the aid office and let them know you are looking for scholarships," he said. "In mid-September or October, visit the office and ask if any are available."
Do the same each year of college, and with department heads as well.
"Get to be friends with the secretary of the department," Buck added. "That person knows where the money is." And students who take work-study jobs in the department with their major also are best positioned to learn about aid.
Finding scholarships outside college also is possible. Community organizations such as Rotary Clubs or unions grant scholarships based on merit. Usually these are awarded while a student is a senior in high school. But because some require certain GPAs in college, money might become available if a recipient fails to maintain requirements or leaves college.
"If you were a semifinalist for any of these, check back," Buck said.
Most large corporate scholarships are awarded when students are in high school, but you still might find a few at www.fastweb.com or www.finaid.com.
-- Choosing the best loans
If you can't afford the full cost of college--and about two-thirds of families can't--you can qualify for low-interest federal loans through your college financial aid office. Among them are Perkins and Stafford loans for students, and Plus loans for parents.
Typically, these loans provide you the lowest interest rates you can get to help pay for college. Congress just upped the rate on Stafford loans, so they are higher than the recent past, but still attractive--a 6.8 percent fixed rate that you repay within 10 years of finishing college.
Some state governments also offer subsidized loans, which are as attractive or even cheaper than federal loans, said Kalman Chany, a New York financial aid consultant. Ask about state government loans at your financial aid office, and if you are attending college out of state, make sure to do your own checking through your home state's higher education office or search the Web. Your financial aid staff might not know about your home state.
To afford college, a freshman might need to use both a $2,625 federal Stafford loan and a $4,000 state loan. There are limits on how much you can borrow through these programs. By the second year of college, the student can receive a $3,500 Stafford loan, and then $5,500 during in the following two years.
If that's not enough, beware of "private" bank loans. Typically, interest rates are high--perhaps 9 to 12 percent.
A more attractive alternative would be a federal Plus loan. These are loans parents can seek through college financial aid offices to cover part or all of the cost of college--regardless of family income. The interest rate is fixed at 8.5 percent.
People might be able to reduce the cost considerably by shopping around among lenders, Chany said. Some will cut the 3 percent upfront origination fees in half. Others will slice 1 percent or 2 percent off the interest rate if borrowers set up a system that allows the lender to withdraw loan payments automatically each month from a checking or savings account.
-- Trying payment plans
Although writing a giant check now and again in January might be unbearable, you can pay for college the same way you pay for a house or car--through monthly payments.
Contact the college bursar's office or financial aid office and ask about a payment plan.
Often colleges deal with outside companies that handle these payments. If you have a choice, the major difference comes down to the upfront fee--sometimes $75; sometimes $100.
-- Using the tax system
If you are planning to pay for college by selling stock, bonds or mutual funds, you can stretch the money further if you don't let taxes whittle it away.
If your child doesn't qualify for financial aid, consider transferring the securities to the student. Since his or her income is probably very low, the student can sell the securities and owe little in capital gains taxes on it.
Parents would typically face a 15 percent capital gains tax, versus 5 percent for a student with a limited income. Through a tax change for 2008 through 2010, your child may be able to sell stocks, bonds and mutual funds then and owe no capital gains taxes.
This year, a parent can give a child as much as $12,000 worth of securities. A couple could provide $24,000, according to Mildred Carter, a CCH senior tax analyst.
Do not do this, however, if your child is receiving financial aid. If a student owns stocks, bonds or mutual funds, and sells them, it will slice financial aid considerably--perhaps eliminating all grants.
Meanwhile, when tax time comes, you might be able to get some extra help.
Depending on income, parents might be able to get back $1,500 in tuition through the Hope Credit the first year, or $1,000 through the Lifetime Credit in subsequent years. Payments on student loans also are deductible.
Gail MarksJarvis is a Your Money columnist.
Source: Chicago Tribune Online Edition
You could be moved to a different kind of tears.
About this time of year, that bill arrives. And it's a shocker: Maybe $20,000 for some schools, to be paid right then and there. And that's just half of it. Around New Year's, its mate will arrive.
But there are ways to get through this trauma--to break it down into more manageable pieces.
-- Discovering free money
Last spring, when the financial aid offer arrived empty--or small--you might have thought the matter was settled. You knew what you were going to have to pay, it wasn't pleasant, but that was that.
Many people believe the financial aid letter is the last word on whether you will get any kind of help paying for college. But you'd be making a mistake to assume the door is shut--even now. That's especially true if your family income is low, and your child has qualified for a Pell grant.
Typically, these grants--or free money--from the federal government are available to people with incomes under about $40,000. If you qualify and haven't sought a Pell grant, you can still go to the financial aid office and ask for one.
But if you've already been offered a Pell grant, you may be able to obtain even more aid. The federal government is introducing two new scholarships this year. Students entering their first year of college can receive up to $750 in an Academic Competitiveness Grant. And students in their second year may land up to $1,300 if they have maintained at least a 3.0 grade point average.
Students in their junior and senior years may quality for another $4,000 each year through a National Science and Mathematics Access to Retain Talent Grant, or SMART grant.Both new grants go to strong students, and are provided in addition to a Pell Grant of up to $4,050 a year. The higher the cost of a school's tuition, the higher the Pell Grant.
To qualify for the Academic Competitiveness Grant the first year, a student had to go through a "rigorous high school program." There are guidelines at www.studentaid.ed.gov, but colleges are still interpreting them, said Carl Buck, vice president of college funding solutions at Peterson's. He suggests students assume they are eligible, request a grant from their college financial aid office, and --if necessary--ask a guidance counselor from your high school to state you've had a rigorous education.
To get the SMART Grant, you need to study math, science, computer or engineering, or a foreign language that's national-security related, Buck said.
"But run, don't walk to your financial aid counselor," said Buck, a former college financial aid officer. "March in and say: `How do I qualify for this grant?'
"He notes that low-income families are sometimes reluctant to ask for aid, but more affluent parents push hard and often get more as a result. "You must be assertive," he said.
If you are affluent and have been denied aid, Buck said scholarships may be available.
Frequently, merit scholarships are handed out in the spring to incoming freshmen when accepted to college, but in summer or fall some recipients opt for other colleges. That means scholarships become available to students who had been denied.
"I always tell students to introduce themselves to the aid office and let them know you are looking for scholarships," he said. "In mid-September or October, visit the office and ask if any are available."
Do the same each year of college, and with department heads as well.
"Get to be friends with the secretary of the department," Buck added. "That person knows where the money is." And students who take work-study jobs in the department with their major also are best positioned to learn about aid.
Finding scholarships outside college also is possible. Community organizations such as Rotary Clubs or unions grant scholarships based on merit. Usually these are awarded while a student is a senior in high school. But because some require certain GPAs in college, money might become available if a recipient fails to maintain requirements or leaves college.
"If you were a semifinalist for any of these, check back," Buck said.
Most large corporate scholarships are awarded when students are in high school, but you still might find a few at www.fastweb.com or www.finaid.com.
-- Choosing the best loans
If you can't afford the full cost of college--and about two-thirds of families can't--you can qualify for low-interest federal loans through your college financial aid office. Among them are Perkins and Stafford loans for students, and Plus loans for parents.
Typically, these loans provide you the lowest interest rates you can get to help pay for college. Congress just upped the rate on Stafford loans, so they are higher than the recent past, but still attractive--a 6.8 percent fixed rate that you repay within 10 years of finishing college.
Some state governments also offer subsidized loans, which are as attractive or even cheaper than federal loans, said Kalman Chany, a New York financial aid consultant. Ask about state government loans at your financial aid office, and if you are attending college out of state, make sure to do your own checking through your home state's higher education office or search the Web. Your financial aid staff might not know about your home state.
To afford college, a freshman might need to use both a $2,625 federal Stafford loan and a $4,000 state loan. There are limits on how much you can borrow through these programs. By the second year of college, the student can receive a $3,500 Stafford loan, and then $5,500 during in the following two years.
If that's not enough, beware of "private" bank loans. Typically, interest rates are high--perhaps 9 to 12 percent.
A more attractive alternative would be a federal Plus loan. These are loans parents can seek through college financial aid offices to cover part or all of the cost of college--regardless of family income. The interest rate is fixed at 8.5 percent.
People might be able to reduce the cost considerably by shopping around among lenders, Chany said. Some will cut the 3 percent upfront origination fees in half. Others will slice 1 percent or 2 percent off the interest rate if borrowers set up a system that allows the lender to withdraw loan payments automatically each month from a checking or savings account.
-- Trying payment plans
Although writing a giant check now and again in January might be unbearable, you can pay for college the same way you pay for a house or car--through monthly payments.
Contact the college bursar's office or financial aid office and ask about a payment plan.
Often colleges deal with outside companies that handle these payments. If you have a choice, the major difference comes down to the upfront fee--sometimes $75; sometimes $100.
-- Using the tax system
If you are planning to pay for college by selling stock, bonds or mutual funds, you can stretch the money further if you don't let taxes whittle it away.
If your child doesn't qualify for financial aid, consider transferring the securities to the student. Since his or her income is probably very low, the student can sell the securities and owe little in capital gains taxes on it.
Parents would typically face a 15 percent capital gains tax, versus 5 percent for a student with a limited income. Through a tax change for 2008 through 2010, your child may be able to sell stocks, bonds and mutual funds then and owe no capital gains taxes.
This year, a parent can give a child as much as $12,000 worth of securities. A couple could provide $24,000, according to Mildred Carter, a CCH senior tax analyst.
Do not do this, however, if your child is receiving financial aid. If a student owns stocks, bonds or mutual funds, and sells them, it will slice financial aid considerably--perhaps eliminating all grants.
Meanwhile, when tax time comes, you might be able to get some extra help.
Depending on income, parents might be able to get back $1,500 in tuition through the Hope Credit the first year, or $1,000 through the Lifetime Credit in subsequent years. Payments on student loans also are deductible.
Gail MarksJarvis is a Your Money columnist.
Source: Chicago Tribune Online Edition
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