An easier way to find the net price of each college

The US Department of Education’s College Affordability and Transparency Center includes a search function that will take you directly to each college’s net price calculator.  The net price calculator is an online tool that estimates your financial aid eligibility, subtracts that from the sticker price of your chosen college, and predicts how much you will need to pay to attend that school next year.

As you select the colleges you’ll apply to, you absolutely must visit each school’s financial aid site.  But this search function can make your initial research a lot easier.

Five tips for students seeking outside scholarships

Applying for outside scholarships (those that come from sources other than the state, federal government, or the colleges themselves) can be a time-consuming process.  And according to Mark Kantrowitz of finaid.org, the raw odds of winning an outside scholarship are approximately 1-10.  Still, free money for college is always a good thing, so here are a few tips to increase your odds.

1. Read finaid.org’s scholarship tips here and here.

2.  Do a search on scholarships.com

Scholarships.com is a free, comprehensive database of scholarships that lets you input data about your profile and generate a list of scholarships for which you may be qualified.

3.  Look for the best fits.

Applying for scholarships is a numbers game, but that doesn’t mean you shouldn’t be focused.  Use the list that Fastweb gives you to find the scholarships you have the best chance of winning.  Read the descriptions and the necessary qualifications carefully.  Any scholarship that sounds like they wrote the description just for you is probably a good match.

4.  Use your time this summer to apply.

Much like applying to college, the better your scholarship application, the better your chance of winning.  Use the summer to apply, write the essays, and consider the best choices for any required letters of recommendation.  It will be much easier and less stressful to do this when you aren’t balancing your senior course load and applying to college this fall.

5. Beware of scholarship search scams. 

How do you spot one?  If you have to pay money for it, or if the service “guarantees” scholarships, it’s probably a scam.  All the information you need to find and apply for scholarships can be found at fastweb.com.

Coming next month: 25 Ways to Pay Less for College

25WaysToPayLessForCollegeLater this month, I’ll be releasing my newest guide, “For Parents: 25 Ways to Pay Less for College.”  It will be sold as a downloadable PDF for $3.00.  It covers everything from how to save before college, to how to get more financial aid and scholarships, to how to reduce costs once a student is attending college.  No dirty tricks that could get you in trouble with colleges or the IRS, just easy-to-follow tips that cut through an often complex and confusing process.

I'll announce it here on the blog when it's available, but if you’d like me to email you, just sign up here. That's a list to receive updates whenever I add an item to our online store, but every email I send includes an opt-out link.  If you don't want to know about any items after this one, just opt out when you get the first email. 

Thanks for reading.

Should parents put money in their students’ names?

I know my college buddies and I are getting older when they start asking me for advice on the best ways to pay for their kids’ future college educations.  Here’s a tip I shared with them at our mini-reunion a few weeks ago: unless you want to hurt your eligibility for need-based financial aid, don’t put money in your kid’s name.

Full disclosure: I am not a financial planner, so please talk to one before you move money around based on what I say in this paragraph.  But while I know there are some healthy tax advantages to a parent putting money in their kids’ names, there is also a terrible financial aid disadvantage to doing so.  When a student applies to college, the federal formula for need-based financial aid evaluates the income and assets of both the parent and the student.  Parents’ income is assessed at 47%, assets at up to 5.65%.  But a student’s income is assessed at up to 50%, assets at (gulp) 20%. 

That means that a parent who saved $50,000 to pay for college will be expected to use as much as $2825 of that money to pay for the first year of college.  Had that money been put in the student’s name, the expected contribution would have increased to as much as $10,000. 

If you’re looking for a smart way to save for college that will also yield some tax advantages, look into 529 plans.  The student is named as the beneficiary, but the parent controls the money.  More importantly, colleges treat 529 plans as parent—not student—assets.  

I suppose it's a good thing that our conversations have matured since college, even if we did spend most of our mini-reunion enjoying beer, listening to Springsteen, and marveling at the degree to which Mike's air cymbal playing really adds something special to "Born to Run."

There are always ways to save for college

The idea of saving for college is daunting when you look at the sticker price of many schools today.  But even making little adjustments can help you save and take control of your college financing. 

Parents, if you buy a $3.50 grande latte at Starbucks every morning before work, that’s almost $900 a year in foam.  A one-pound bag of Starbucks Sumatra costs about $14 and brews about 40 8-oz. cups of coffee.  Brew your own java at home, and you’ll save about $15.75 per week in coffee expenses. 

Do that every year your student is in high school and you’ll have saved over $3,000 to put towards college (and that’s not even figuring the interest you’ll accrue if you actually put that extra money in an account as you go along).

I know that $3,000 doesn't make a huge dent at schools that cost up to $50,000 a year to attend.  But every penny you save is a penny less you have to borrow to attend college (or hope to get in the form of grants and scholarships).

There are always ways to save for college. 

The financial downside to part-time jobs in high school

There are a lot of good reasons for a student to get a part-time job in high school—extra money, experience on your resume, and something to impress colleges, to name a few. But there is one potential downside you should be aware of as you start your college planning.  Half of your after-tax income over $3,000 a year will be deducted from your financial aid eligibility.

Let’s say an ambitious kid puts in a lot of hours working a part-time job at an ice cream shop.  If she earns $5,000 after taxes (that’s not unreachable, even at minimum wage), she and her family will lose $1000 in financial aid eligibility. The colleges will also take 35% of any money she managed to save before she earned that $5,000.  So the financial aid formula penalizes the student who works and earns in high school, and can be kinder to the kid who’s never made a dime. 

Still, I think it’s worth it to have the job.  In addition to the benefits I’ve written about before here, every dollar a student has to put towards college is a dollar your family doesn’t have to rely on financial aid to get.  The formula may be kind to kids (and families, for that matter) that never bothered to save their money, but remember that not all financial aid is free money.  A lot of aid comes in the form of loans, most of which are taken out in the student’s name, that need to be paid back.    

A smart approach would be for students to start learning the value of saving.  If you get a part-time job, put part of your weekly paycheck into your savings account.  If your family doesn’t need you to help with college costs, consider yourself lucky.  You can use (or keep) the savings for yourself.   Otherwise, use the money to help pay for college, and be proud of the fact that you’re doing your part to help with college costs.

Is that your final (financial aid) offer?

One of the most common questions I hear from parents at my financial aid seminars is,

“Is it true that it’s possible to negotiate a better financial aid offer with a college if another school has given you more money?”

My answer is always that “negotiate” is probably the wrong word.  You’re not buying a car.  But if two colleges, especially schools who compete for the same types of students, give you two very different offers, you can politely ask the school who offered less to review your case.  Any change in your offer will usually have less to do with haggling than it does with a financial aid office exercising what they call "professional judgment." 

Before you call a financial aid office to ask for a review, read this article on finaid.org.  You’ll have a much better sense of how professional judgment works and, I think, a better chance of getting the aid package you need.

The real deal on financial aid

I’ve written before about how much I wish more colleges would stop marketing and start being more genuine, that more schools should use their contact with students to help them make good decisions, rather than sell to them.

Muhlenberg College’s “The real deal on financial aid” is a great example of a college getting this right.

Most colleges’ financial aid websites sell the student on the affordability of the school. They’ll mention statistics about how many of their students receive financial aid, then list important dates and deadlines, and stop there.  But Muhlenberg uses this page as an opportunity.

1. They’re teaching students how the process works.

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If money is a factor in your college search and it will impact your final choice, you should make sure to apply to colleges where you are clearly in the top third to top quarter of the applicant pool.  If you are just squeaking in for admission, odds are your financial aid, if it comes, will be mostly aid you give yourself (i.e., loans or work).

2. They’re giving good advice, not selling.

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If a college gives you a great package, they probably really want you and that's a great feeling. The trick, as with many things in life (and you might as well learn this now rather than later) is to figure out how to want what you can have instead of what you can't.

3. They encourage students to make the best decisions, whether or not that choice is to come to Muhlenberg.

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Whether you sacrifice a lot to attend one of your more expensive options or take the money and run to your least expensive option, you will find that the life lessons have begun before you even sit in your first college classroom. There are no right answers, only choices. Choose wisely—and good luck!

If Muhlenberg is willing to be this helpful before you've even applied, imagine what they must do when you actually enroll. 

Bravo, Mules.

A great tool for researching financial aid at your chosen colleges

The National Center for Education Statistics offers a “College Navigator” tool that will let you look up colleges to get general information, admissions statistics, and most interestingly, detailed financial aid information.

Here’s an example from the entry for Colgate University:

First you get detailed information of the full cost of attendance (not just the tuition). 

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Then you get detailed information about the distribution of aid.  How much of it was in the form of scholarships?  How much consisted of loans that need to be paid back?  Many colleges claim that they meet 100% of demonstrated financial need.  But not all financial aid is created equal, and it's helpful to know just how much of each kind is typically being given out.

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Here's the information on financial aid for all students, not just freshmen.  Why is that important?  If the aid for all students is significantly lower than that for freshmen, it could mean that the college gives more generous aid to encourage students to attend only to decrease that aid once they've spent a year or two at the school and are less likely to want to leave.

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And finally, the last table shows what the average family, arranged by income, actually paid for the first year at Colgate.  Note to families who say, "We're not applying for aid because we know we won't qualify": Families who made more than $110,000 paid an average of $27,892 of the $55,570 cost of attendance.  When in doubt, fill out your FAFSA and apply for financial aid.

Finally, a link to the Net Price Calculator–a tool to let you input your financial aid information and get an estimate of how much aid you could receive under each school's formula–is included at the bottom.

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Three benefits of work study awards

If you qualify for need-based financial aid, part of your aid award may include work study—a paid job, usually on campus, to help you pay for college.  Here are three reasons you should probably accept that portion of the award offer.

1. Work study is guaranteed work.  You won’t have to look for a job once you get to campus.

2. The money you earn through work study will not count against you when you apply for financial aid the following year.  For jobs outside of work study, the financial aid formula assesses student income at a whopping 50% once you earn more than $3,000.  That can make a huge difference for a student hoping to work to help pay for college. 

3. The right work study job can be great work experience.  Some work study assignments are pretty menial, like scanning ID’s at the cafeteria.  But you might also end up working in the athletic department, or helping a professor on a research project, or even working in the admissions office like one of our counselors did with her work study job in college.  Don’t just cross your fingers and hope for a good assignment.  Call the college’s office that handles work study and ask for information on the types of jobs that are available.  Look into options that seem interesting and ask if you can be assigned to one of them.  Don’t be pushy—just show a little gumption and it might pay off in more ways than one.