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. 

No FAFSA regrets

It’s hard to imagine a worse college admissions regret than wishing you’d taken the time to apply for financial aid, especially if that regret comes in the face of not being able to afford your chosen college. 

Don’t make excuses.  Don’t assume you won’t qualify or worry that asking for aid will negatively impact your chances of admission (it won’t).   Unless you are absolutely sure you can painlessly pay the full cost of any of your chosen colleges for four years, take the time to fill out the FAFSA this month (and any other forms your particular colleges require).

Most colleges require you to submit a FAFSA no later than March 1, so this is the time to get on it. 

A few other FAFSA reminders:

1. This is the only place you should go to fill out the FAFSA.  Never pay to fill it out (the first “F” in FAFSA stands for “Free").

2. Unless otherwise stated in the directions, “You” or “Your” refers to the student, not the parent.

3. You’ll need completed taxes to finalize your FAFSA.  If your taxes won’t be done in time, you can submit estimated data now and edit it later.

4. The FAFSA only allows you to choose 10 schools to have it sent to.  If you’re applying to more than 10, wait until the FAFSA folks send you your Student Aid Report (SAR).  Then log back into your FAFSA and specify the additional colleges you’d like it sent to.

5. If you have FAFSA questions, there’s a good chance you’ll find the answers in this section of finaid.org.

What about saving for college?

The most important college financial planning strategy a family can employ is to save as much as possible.  The more cash you have on hand, the less you’ll have to rely on financial aid, the less you’re likely to have to borrow, and the more control you’ll have over your student’s college costs.  But where should you put the money?  Should it be in the parents’ name or the student’s name?  Is it worth it to save just so colleges can take the money, while families who don’t save get financial aid?  All are good, fair questions.

The college savings section of finaid.org (I have no connection to it–it's just hands-down the most comprehensive and well respected source of free college financial planning advice) includes advice on deciding how much to save, common myths about saving, the best investment strategies, and the advantages/disadvantages of the most common college savings plans (it even comes right out and explains why the 529 college savings plans are the best).

If you need advice about saving for college, start there.  You’ll be glad you did.

Can applying for financial aid hurt your chances of admission?

If you have any concerns at all about paying for college, you should fill out a FAFSA and apply for need-based financial aid.  Even the colleges themselves will give you the same advice. 

Unfortunately, lots of families worry that the simple act of applying for financial aid is like painting a scarlet dollar sign on a student’s application for admission, that their kid will somehow be punished by the admissions office just because his parents had the audacity to ask to be considered for aid.  Some of those families worry the college will see their student as a potential financial burden (those families would rather hide that financial need, let the kid get admitted, and figure out the money later).  More financially comfortable families sometimes worry they’ll look greedy for asking and that it will carry admissions ramifications. 

Whatever the cause for the concern, it’s totally unnecessary.  Here’s why. 

1. If you receive need-based financial aid from a particular college, it means that you have adequately demonstrated to them and to the government that you would be unable to reasonably afford the tuition without financial assistance.  Even if the college could penalize an applicant because of that need (which they won’t), what difference would it make?  That offer of admission will be meaningless if you can’t afford to pay for it and you never bothered to apply for aid. 

2. On the other hand, if a college decides you don’t qualify for aid, they’ll just decline to offer you any money.  They don’t make value judgments or take punitive measures to punish a family for asking.  Bill Gates could fill out the FAFSA when his kids apply to college, and it would have absolutely no negative bearing on those kids’ chances of admission (the fact that their last name is Gates would make a huge difference, but that’s a different blog entry).  

3. It’s the job of the admissions office to determine who they want in the freshman class based on a host of other things that have nothing to do with finances.  Even at colleges that are not need-blind (where admissions officers are aware of your financial need), finances are far from the forefront of their evaluation.   

Unfortunately, this is one of those concerns that some families have a hard time letting go of to the point that they’ll argue about it…

•    ”But not all colleges are need blind.  Some of them DO know if you’re applying for aid!”
•    “I heard that full-pay families have a better chance of getting in.”
•    “I read that kids who don’t need financial aid get taken off the wait lists first.”

To every one of those concerns, I’d simply ask them:

Can you afford to comfortably send your student to this college without any financial help?

If the answer is “No,” every other possible concern about applying for aid is moot and you should get to work on your FAFSA.