College and Finance is proud to present Part II of “How to Save Thousands of Dollars on the Cost of College,” written by Todd Johnson of College Admissions Partners. In “7 Money Saving Questions to Ask Colleges,” Todd goes through the finer points of financial aid, providing solid suggestions for questions students and parents should be asking. In today’s economy, asking the right questions can save you a significant amount of cash, which is always a good thing.
All right, you have learned the basics of college financial aid. Now you need to know the questions to ask colleges that will help you save money.
7 Money Saving Questions to Ask Your College
1. What percent of my need will you meet?
Remember that EFC, or expected family contribution that the FAFSA determined? Some colleges will meet 100% of your need. Need again is defined as the cost of the college minus your EFC. So what does it mean if a college says they will meet 100% of your need? It means that once the FAFSA or Profile form has determined how much you (and your family) can pay for college, the college will pay 100% of the rest of the bill.
Colleges will typically meet the need you have using a combination of grants, loans and work-study programs. Most colleges will award work-study opportunities and loans first. If there is a need after that, the remaining need will be supplied by grants. The colleges will typically have a standard loan and work study amount that they award. You should ask about what these numbers are when investigating the college.
Let’s see an example of a financial aid award from a college that provides 100% of need with a student who has an EFC of $5,000:
- College Financial Aid Information
Total cost of college: $40,000
Expected Family Contribution: $5,000
Need: $35,000
- Financial Aid Award
Work study: $2,000
Loans: $4,000
Grants: $29,000
At a college that meets 100% of your need, with an EFC of $ 5,000, you would only have to pay $5,000. You may be wondering, “but what happens if the college doesn’t meet 100% of need?” Most colleges don’t pay the total amount of need that their students have. Let’s use the example of our imaginary college from above only this time assume that the school only provides 90% of need.
This college only provides 90% of the $35,000 need or $31,500. Thus, your out of pocket expenses are the $5,000 EFC plus an additional $3,500 for a total cost of $8,500. This example makes it easy to see why a school that meets 100% of need is often a better financial aid “deal” than a school who doesn’t meet all of the families need. Many of the most expensive private colleges meet 100% of the students need while cheaper public colleges usually meet less than 100% of the need. This means that for many students it can be cheaper to go to an expensive private college than to attend a cheaper state school. Until you know what percent of need the college meets, don’t eliminate a college from consideration just because it is expensive.
2. Does the college have merit based aid?
Many colleges that don’t meet 100% of a students need do offer scholarships for some students. If your student is near the top of the application pool for a less selective college, they may get some money if they qualify for merit based aid. Thus, in some cases, if the student is willing to look at a less selective college, they may get a better financial aid package. Here are some more questions you should ask if the college provides merit aid.
How many merit awards are available?
What is the value of the merit awards available?
What are the qualifications to receive one of these merit awards?
This works even for families that don’t qualify for need based aid at all. If your student can qualify for a merit based award you won’t need to pay the full stated cost of the college.
3. How is financial aid determined after the first year?
Some colleges have a policy of providing good financial aid for the first year and then substantially reducing the grant aid in the following years while increasing the loans. You should ask the college in which you are interested how they determine financial aid after the first year and what the average loan is after the first year. While it is typical that the amount of loans will increase each year if the increase is substantial you will want to take that into consideration.
4. What is the average loan amount at graduation of those students who have loans?
This question will give you the best indication of the amount of loans that this college requires compared to other colleges in which you may be interested. Although most students will have some loans when they graduate, you don’t want this amount to be any more than necessary.
5.What is your policy regarding outside scholarships?
Outside scholarship are those that come from someplace other than the college. Most colleges will subtract money earned in outside scholarships from your financial aid package. Some colleges will reduce the loan burden by the amount of the scholarship, but other colleges will reduce your grant money. If the college reduces the amount of loans you have to take out that is a benefit to you. There is no benefit to you if the college reduces the grant aid.
6. What is your packaging policy?
Most colleges give a financial aid package that includes grant money, loans and work study. But each college combines this money differently. Specifically you want to know:
What percentage of an aid package from your college is grant vs. self-help (I.E. loans, work study)?
Obviously, the more grants a student can get instead of loans and work study, the better it is for the student.
Does your college have a preferential packaging policy?
Preferential packaging occurs when a college gives a better financial aid package to a student with a stronger academic background than to another student with the same financial need but with a weaker academic background.
7. What is your four year graduation rate?
What difference does a college’s four year graduation rate make? This is an important question that many people never consider. Another way to phrase this is, How many years of college am I going to have to pay for? If the college has a high four year graduation rate, you will most likely only have to pay for four years of college. However, if the college graduates most students in six years then you can plan on paying for six years of college, not four.
The Bottom Line
Now that you know something about financial aid, including the questions to ask each college you are considering, you can make an informed decision in paying for a college education and hopefully save yourself money in the process.
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March 09 2009 12:06 pm | College Advice and Financial Advice and Financial Aid
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