Financial Aid: Paying for College
Financial aid: funds provided to students and families to help pay for college.
Honest communication between parents and students is essential for choosing a college that is feasible and reasonable as a financial obligation. The discussion about money, costs, and projected spending can be a difficult one, but it is best to begin this discussion early. This way you, as a student and family, can make reasonable college choices.
Categories of Financial Aid
Need-based: based on family income
Non-need-based: based on merit, academic achievement, leadership, artistic/athletic ability, etc.
Types of Financial Aid
- Money that does not have to be paid back.
- Usually awarded to students with strong academic and/or arts records.
- Money that does not have to be paid back.
- Usually awarded on basis of financial need.
- Money students and parents borrow to help pay for college expenses.
- Available from federal programs (Stafford, Perkins) and commercial banks, often at a low interest rate.
- Repayment from federal loans usually begins six months after students graduate from college.
Unsubsidized loans: Interest accrues while student is in school (full-time).
Subsidized loans: Interest begins to accrue six months after you leave school.
- Allows student to earn money while in school to help pay educational costs.
- In form of a paycheck, or non-monetary compensation, such as room and board.
Sources of Financial Aid
- Largest source of financial aid.
- Aid awarded primarily on the basis of financial need.
- Must apply every year using the Free Application for Federal Student Aid (FAFSA)
- FASFA available October 1 the year before the student will be attending college.
- Students and parents should complete the FAFSA (http://www.fafsa.ed.gov/) by January 1 of the year the student will be attending college. The FAFSA determines the family’s EFC (expected family contribution) number based on the tax information from the previous year (2015). With that number, the colleges to which the student has applied develop financial aid packages that often will accompany the acceptance letters. You will receive a different financial aid package from each college.
- Residency requirements.
- Award aid on the basis of merit and need.
- Some programs use information from the FAFSA.
- Deadlines vary from state to state.
- For more information: www.mhec.state.md.us.
- Foundations, businesses, charitable organizations.
- Deadlines and application procedures vary widely.
- Begin researching private aid sources early.
- Free internet scholarship search engines:
Civic organizations and churches
- Research what is available in your community.
- To what organizations and churches do the student and family belong?
- Application process usually begins in spring of senior year.
- Small scholarships add up!
- Companies may have scholarships available to children of employees.
- Companies may have educational benefits for their employees.
Schools (the colleges/conservatories to which the student is applying)
- Largest source of grant aid.
- Contact Financial Aid Office of school for requirements.
- Merit and need-based aid.
- Applications and deadlines.
WHERE TO START?
Contact schools/visit schools’ Financial Aid websites to find out:
- Scholarship requirements
- Need-based aid requirements
- Required forms (school applications, CSS profile – used for non-federal student aid, federal tax returns, etc.)
- Financial Aid scholarships and deadlines (in addition to the application deadline) that are specific to each school
Investigate private sources and learn more about aid available.
Families are encouraged to get an early estimate of their eligibility for federal student aid (FAFSA4caster) at www.FederalStudentAid.ed.gov.
Complete the Free Application for Federal Student Aid (FAFSA) by the earliest deadline. The FAFSA is available every year on October 1. See below.
WHAT IS THE FAFSA?
The Free Application for Federal Student Aid (FAFSA) is a standard form that collects demographic and financial information about the student and family.
The FAFSA is filed electronically at http://www.fafsa.ed.gov/ (available in English and Spanish).
Information from the FAFSA is used to calculate the expected family contribution (EFC). This is the amount of money a student and his or her family may reasonably be expected to contribute toward the cost of the student’s education for the following academic year. The EFC is almost always higher than you think it should be!
Most questions about the FAFSA can be answered here: http://www.finaid.org/questions/faq.phtml
You may contact customer service at FAFSA at 1-800-433-3243.
STEPS TO FEDERAL STUDENT AID*
- Get free information and help from the financial aid office at the college you plan to attend, or the U.S. Department of Education at www.FederalStudentAid.ed.gov or 1-800-FED-AID. Free help is available any time during the application process. If an organization offers to help you through the process, and charges you a fee, it is a scam! YOU SHOULD NEVER HAVE TO PAY FOR HELP.
- Get a Federal Student Aid ID, a personal identification number. An ID lets you apply, ‘sign’ your FAFSA, make corrections to your application information and more – so keep it safe. Go to https://fsaid.ed.gov/npas/index.htm to get your ID. Both a parent and student need an ID.
- Collect the documents needed to apply, including income tax returns and W-2 forms (and other records of income). A full list of what you will need is at www.fafsa.ed.gov.
- Most colleges require that you file the FAFSA by January 1-February 1 for Regular Decision applicants. Apply as soon as possible after October 1 to meet school and state aid deadlines. Apply online at FAFSA on the web (the fastest and easiest way) by going to www.fafsa.ed.gov. If you don’t already have your ID, you can get it when you complete the online FAFSA.
- The U.S. Department of Education will you send you your Student Aid Report (SAR) – the result of your FAFSA. Review your SAR and, if necessary, make changes or corrections and submit your SAR for reprocessing. Your complete, correct SAR will contain your expected family contribution (EFC) – the number used to determine your federal student aid eligibility. IMPORTANT: Do not assume that the EFC number is the amount you will have to pay for college. It is simply a guideline for schools to assess how much need you have.
- The college that you plan to attend may request additional information from you. Be sure to respond to any deadlines, or you might not receive federal student aid.
- The colleges will tell you how much aid you can get at a particular school. Contact the financial aid office if you have any questions about that aid being offered. Review award letters from schools to compare amounts and types of aid being offered. Decide which school to attend based on a combination of (a) how well the college suits your needs and (b) its affordability after all aid is taken into account.
Many private colleges require the College Scholarship Service (CSS) PROFILE form in addition to the FAFSA. You may register for the PROFILE online at https://profileonline.collegeboard.com. Consult this site to determine which private colleges require submission of the profile. Some schools require the PROFILE to be submitted by November 1 of senior year.
FINANCIAL AID PACKAGES
Based on the EFC, each college to which the student has applied will develop a financial aid package.
Financial aid packages can vary widely and are usually a combination of scholarships, grants, loans, and work study.
***IMPORTANT & REQUIRED READING***
Money, Money, Money.
At BSA we are very interested in your success after high school. We want to help you find the post-secondary education that will prepare you for a great career and a successful life.
The choices you make now will affect the path of your life. One of the important choices you have to make has to do with money and debt.
As education debt surpasses all consumer debt and as the cost of attending college continues to rise much faster than inflation, we are extremely concerned about the financial burden that students accept during college studies.
This debt will follow students and/or parents until it is paid, a process that can extend 30 years. This debt cannot be expunged through bankruptcy.
We want you to be an informed consumer of education.
- Maryland has the second-highest average student debt in the U.S. at $33,660. (only D.C. students carry more)
- We predict that last year’s graduating class from BSA will have higher debt than average for Maryland students for four years of college.
Colleges fall into three rough categories in terms of their cost—
- Private schools such as Johns Hopkins or Juilliard
- Public schools in other states such as University of Virginia or Point Park University in Pennsylvania
- Public schools in our state such as University of Maryland or St. Mary’s College
This was the average cost of each of these three types for the BSA class of 2013 (Numbers represent the cost of 4 years of tuition, room and board):
Tuition, room, and board
Private schools $185,624
Public schools out of state $163,689
Public schools in Maryland $76,054
But, there are scholarships, right?
After all scholarships and grants (support you don’t have to pay back), the average cost for the BSA class of 2013 for four years of study was the following:
Type of School Out-of-pocket expense
Private schools $107,490
Public schools out of state $79,294
Public schools in Maryland $41,162
Still more than the state average debt and still a lot of money.
If you have to figure the monthly payments, put the amount you want to borrow in a loan calculator like the one found here: www.finaid.org/calculators/loanpayments.phtml. Here are the monthly payments and total cost for the out-of-pocket expenses above (30 years with a 4.66% interest rate)
Type of School Monthly Payment Total Cost (principal & interest)
Private schools $555 $199,766
Public schools out of state $409 $147,366
Public schools in Maryland $213 $76,499
Again, we want you to be informed consumers. Please think about the long-term impacts of your financial options. Please think about balancing the value and the cost of your college education.
PLEASE, PLEASE, PLEASE do not be seduced into going to a particular school if you will have to take out a large amount of loans to do so. Remember: If you want to go to graduate school (a necessity for many career choices), you will likely be taking on additional loans.
We strongly discourage students and families to take out more than $50,000 TOTAL in college loans. Most scholarship and grant money diminishes over the course of your college career. Therefore, you can expect to receive the most ‘free’ money for your freshman year.
You apply to a college that costs $50,000/year for tuition and room and board.
You are accepted and receive a "generous" financial aid package for your freshman year.
It looks something like this:
Scholarships (don’t have to pay back): $20,000
Grants (don’t have to pay back): $10,000
Loans (must pay back): $20,000
Nice financial aid package, right? They are GIVING you $30,000!
Not so fast.
First of all, remember that scholarship and grant money usually diminishes each year after freshman year. Secondly, if your parent(s) cannot pay that $20,000 difference from savings, you will likely be taking out a MINIMUM of $20,000 for at least four years ($80,000 total).
What does that REALLY mean?
This is what it means:
In order to pay back $80,000 to the federal government, you (or your parents) will be paying $412.99 a MONTH for 30 YEARS. Because of interest, you will actually end up paying the government $148,675.66.
So, how much is $412.99 a month? That amount can pay for fairly inexpensive rent, two months of food for a family of four, or two car payments (for a Honda, not a BMW). Not to mention electric bills, phone bills, doctor bills, gasoline, clothes for your children, etc.
It means that taking out $80,000 for a four-year college education could substantially limit your opportunities and options for your future.
And what if you don’t get a high-paying job? What if you are in danger of becoming homeless, losing your car, or having the electricity shut off in the dead of winter? What if unforeseen tragedy strikes and you have to pay $100,000 in medical bills? What if you simply CANNOT afford to pay off the loan?
IT DOES NOT MATTER. Filing bankruptcy does not affect student loans. The government will garnish your wages (take money directly from your paycheck before you even see it) for as long as it has to.
Because of the enormous cost of college, we strongly encourage all students to apply to at least THREE Maryland state schools (read: more affordable). There are excellent options for students in Maryland. You may also consider going to community college for two years and then transferring to four-year school. You will still get a degree from the four-year college, and you will have saved a LOT of money. University of MD even has a partnership with four community colleges in the area called the Maryland Transfer Advantage Program (MTAP). If you go to one of these community colleges and complete your two years with a GPA of 3.0, you are almost guaranteed a spot at University of MD for your final two years. You can find more information about MTAP here:
Currently, the Federal Stafford Loan has a fixed interest rate of 4.66% and the Federal PLUS loan has a fixed rate of 7.21%.
Go to www.finaid.org/calculators/loanpayments.phtml for a loan calculator.