Tuesday, November 16, 2010

Covering the cost of college

According to Sallie Mae's national study, "How America Pays for College 2010" (conducted by the folks at Gallup), the average U.S. family covers almost a quarter of college costs with scholarships and grants -- but that's rarely enough to pay the entire bill. The average scholarship was about $7,800; according to data from The College Board, the average cost per year at a public four-year college is about $9,000 -- about $35,000 per year for some private four-year colleges. And that's for undergraduates.

The study of more than 1,600 undergraduate students (age 18 to 24) and their parents also found that 43 percent of families received scholarships for the previous academic year, up from 40 percent the year before. And for those who are looking ahead to next year, Sallie Mae's free scholarship search currently has more than 1 million scholarships -- $6 billion worth -- to which you can apply between now and February 2011.

My oldest stepdaughter hits college the same year my youngest son hits kindergarten -- year after next -- so tuition, scholarships, loans, and grants are high on our list of "Things We Really Should Be Thinking About Right Now, Or Perhaps Yesterday." November is, apparently, National Scholarship Month, and to that end Sallie Mae is offering parents and high school students a chance to chat with author and scholarship expert Kelly Tanabe tomorrow (Wednesday, Nov. 17) from 9 to 10 pm. (EST). The chat will take place on Sallie Mae's Facebook page, so you can sign up to participate or lurk at their wall as you see fit.

Tanabe is the co-author of 12 books on the college admissions process and on paying for college; her latest book is The Ultimate Scholarship Book 2011. I asked Erica Eriksdotter at Sallie Mae for some tips for parents who are looking to pay for college soon; during the chat, Tanabe will be addressing ideas like these and many others. Here's what she shared with me:

Fill out the FAFSA. Fill out the Free Application for Federal Student Aid for federal grants and loans as close to January 1st as possible for the following school year.

Every little bit counts. You can earn a little bit extra for college by taking advantage of programs like Upromise, in which a portion of the money you spend on certain eligible purchases goes toward saving for college. (You can also encourage friends and family to contribute to Upromise, since the money earned comes from their everyday spending, not from a special contribution.)

529 College Savings Plans. These plans are "tax-advantaged" when used for higher education, have no income limitations, and are easily transferable to another beneficiary if needed, Sallie Mae says. For the first time, this year you can use money from a 529 plan to pay for a computer, too. Friends and family can contribute directly to 529 plans as well.

Keep track of the costs. Create your own plan for the college years, taking into consideration your (the parents') salary is now and what their (the students') salary may need to be after graduation in order to keep loan payments current. Sallie Mae offers a free online planning tool to help you create a plan for attending one of 5,500 colleges and universities in the U.S. Also something to consider: A tuition-payment plan that will allow you to spread tuition payments over a longer time period, instead of having to pay them all at once at the beginning of each semester.

Use them or lose them. Don't forget to claim tax credits and deductions if you're entitled to them! Why let that money slip out of your wallet?

Consider loans. There are two main types of college loans out there: federal student loans and private student loans. Sallie Mae suggests that parents consider federal student loans first, if possible; private loans based on credit or other factors have rates that can from less than 3 percent to more than 11 percent, based on today's daily reference rate (or LIBOR).

Are college costs looming for your family? Are you already planning for them, or are you at your limit juggling the things you need to pay for today?


AIV said...

Thank you for this well written and informative article. I have forwarded your article to a couple of people with college bound children. Thank you.
Amelia Voorsanger

fibrowitch said...

Or you could do what I did back in the 80's Worked full time and take 3 or 4 classes a semester. I did not live on campus so I did not have to pay the "rent" the college wanted. No need to get a meal plan either.

It took me a bit longer to graduate but it was worth it. I only took as many classes as I could afford. I got an internship in my fourth year that turned into a full time job.

No debt and great job bummer that my health failed or I would still be employed today.