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Making college more affordable

What you need to know about financial aid

The cost of college keeps going up. But that doesn't mean you can't afford it. Financial aid can help close the gap between your education budget and what college actually costs.

The money you need is out there

For those of us who don't have unlimited access to funds, financial aid can be the key to making education affordable. The College Board, the not-for-profit organization responsible for the SAT®, reports that $143 billion in financial aid was available for the 2008-09 academic year.

Understanding financial aid

Actually, financial aid is pretty simple stuff. There are many different opportunities, but they tend to come in three basic categories:

Grants and scholarships
Grants and scholarships provide money for education that you are typically not required to repay. These are available in two varieties:

  • Need-based – which are awarded on the basis of financial need
  • Merit-based – which are awarded on the basis of special skills, abilities, achievement, etc.

Work-study
Work-study consists of federally subsidized employment opportunities, typically on campus or with nonprofit organizations. These opportunities are generally awarded on the basis of need.

Student Loans
The United States government provides three types of education loans through banks and other financial institutions. These include Federal Stafford Loans, Federal Grad PLUS Loans, and Federal Parent PLUS Loans.

Use monthly payment plans to reduce borrowing
Most institutions provide monthly payment plans to help families minimize the amount they need to borrow.

Where can you find financial aid?

Financial aid is available from a wide variety of sources. You just need to know where to look. For example, did you know that the United States Government disburses more than $80 billion in financial aid each year? There are many other sources as well, including colleges and universities, corporations, non-profit organizations, and many more.

File your FAFSA early

To be considered for federal student aid, start by completing the Free Application for Federal Student Aid, or FAFSA. The Department of Education uses the information you provide on your FAFSA to determine your eligibility, as based primarily on financial need.

File the FAFSA as soon as possible after January 1 of the year you wish to receive federal student financial aid. Aid is awarded on a first-come, first-served basis, so be sure to complete your FAFSA (as well as other financial aid forms and applications) as early as possible.

If you're still in the process of choosing a school, you can designate up to 10 schools to receive your FAFSA information.

Even if you think you might not be eligible for need-based money to pay for college, it is important to remember that you must file the FAFSA to be considered for affordable federal student loans. In addition, your school and state may use the information from your FAFSA to consider you for other types of financial aid like grants and scholarships.

For more information about the FAFSA, or to complete the form online, visit www.fafsa.ed.gov. You can also get a general idea of your eligibility for federal aid using the FAFSA4caster, the US government's FAFSA information site.

Apply for scholarships

"At the same time you're going through the admissions process, you should be looking at the kinds of scholarships you can apply for at each school," explains Brenda Dillon, Vice President of Product Planning and Development for KeyBank Education Resources.

To find the scholarships that are right for you:

  • Contact your high school guidance office to learn about local, regional and national scholarship sources; in addition, some school boards or athletic/music booster groups offer scholarships
  • Contact parents' employers as many companies establish scholarships to aid the children of employees
  • Contact the financial aid offices of the colleges to which they're applying for admission and find out if they have special scholarships based on academic merit, special talents or athletic skills; ask if you need to apply for these scholarships with a separate application or if you will automatically be considered for them.

In all cases, be sure to understand the application deadlines. "Merit-based scholarships, for instance, tend to have very early deadlines. So, if you're pursuing scholarships for left-handed tuba players, you'll need to get applications in as soon as possible. Deadlines can be as early as the end of November of the year prior to the enrollment," advises Dillon.

Understanding your Student Aid Report

Not long after you file your FAFSA, you'll receive a Student Aid Report (SAR). The SAR lists your Expected Family Contribution (EFC), which is used to determine your eligibility for need-based aid. The colleges you listed on your FAFSA form also receive your SAR electronically.

"The schools take all of this information and then award the various types of aid," says Dillon. "That can be federal, state, and institutional. For each type of aid, they apply a specific formula or methodology, and that determines how you're awarded."

Notify your school if your situation changes

"You can't trick the system," Dillon explains. "The FAFSA uses standardized federal methodology, and each state also uses a specific, standard methodology. Similarly, colleges and universities are governed by internal, institutional rules."

However, schools do have the authority to override these formulas and methodologies in special circumstances, so it's important to let them know if your financial picture changes after you submit your FAFSA.

For example, if one of your parents becomes unemployed after you submit your FAFSA, the school may have the option to increase your award. So if you receive an award letter after a change like this, be sure to contact the financial aid office immediately.

Understanding your Student Aid Report

Not long after you file your FAFSA, you'll receive a Student Aid Report (SAR). The SAR lists your Expected Family Contribution (EFC), which is used to determine your eligibility for need-based aid. The colleges listed on the FAFSA form also receive the SAR electronically.

"The schools take all of this information and then award the various types of aid," says Key's Dillon. "That can be federal, state, and institutional. For each type of aid, they apply a specific formula or methodology, and that determines how aid is awarded."

Develop productive working relationships

Make an effort to develop relationships with college financial aid offices. It's as essential as getting to know admissions officers and recruiters. Throughout the process, be extra-attentive to the advice and instructions they provide. Following these important guidelines can be crucial to your success.

So how can you get to know these important people better?

"I would schedule a visit, just like you schedule a visit to talk with the admission people about getting in," says Dillon. "You want to make sure you understand how the aid process works at each school. And review the process early. Even if you're not going to be graduating until next year, contact the financial aid office now and start looking at what they ask students to do."

Remember; don't hesitate to call the financial aid office if you have questions. Ironing out the details and asking questions can help the process go smoothly.

Comparing the awards letters

Typically, award letters start arriving around May 1. That's when you need to sit down with your parents or guardians and start making sense of the offers.

"When it comes to evaluating the award letters, one of the most important parts is figuring out how much it's going to cost you out of pocket. Is the school saying that they're meeting 100% of your needs or does the aid package include loans?" says Dillon.

"It may be worth taking out loans in order to get your student into a top-rated program. But if you've done your research and feel things are about equal, go with the school that offers the most free money."

 

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