After months of anticipation, your child‘s college admissions decisions have arrived. Congratulations! But before making the final college choice, many families still have one more very important thing to do: compare the financial aid offers from all of the colleges to which their student has been admitted and decide which option is best for their family.
Your family should receive financial aid and scholarship offers from all of your child‘s colleges by April 1. If you have not received a financial aid offer from a college to which your child has been admitted by the first week in April, call the financial aid office immediately.
Once you have received all of your child‘s financial aid letters, the following three-step process can help your family compare the offers accurately and make a smart decision about which college to attend.
Step 1: Determine your total cost of attendance for each college
In their estimates of “cost of attendance,” colleges usually include tuition, room, board, fees and a rough estimate for the average student‘s additional costs such as books, personal expenses and travel. However, the college‘s rough estimate may not be your family‘s real cost. For example, some majors have additional expenses such as lab or studio fees and special equipment. A student who attends college far from home may need to spend more for transportation than the “average” student does. Students attending college in a large city or moving to a colder climate that re- quires a new wardrobe may also find that the “average” for personal expenses is not realistic.
Do your research about airfare, costs in the student‘s intended major, and even what a cup of coffee costs in the local area before assuming that the college’s estimate of “total cost of attendance” is going to be realistic for your child. For each college, develop your own “estimated total cost of attendance” figure as your first step in comparing financial aid offers.
Step 2: Compare your family’s out-of- pocket costs for each school
Every college expects each family to contribute something to their student‘s education. To make sure you‘re accu- rately calculating what each college will actually cost your family, compare each of the following items from each financial aid letter side-by-side:
Expected Family Contribution (EFC): This is the dollar amount the college expects your family to contribute out of income and savings. Your EFC may include both a parent contribution and a student contribution. The student contribution shown on many financial aid offers is typically what the college expects the student to earn from a summer job. If you (or your child) do not earn that amount, or can‘t find a summer job, then the family will need to cover this amount as well.
Student Loans: Most financial aid of- fers from colleges will include student loans. You may choose to turn down loans, or only accept part of the loan amount offered, but if you do so, your family will need to make up the differ- ence in some other way.
Student loans, in and of themselves, are not evil. Borrowing a manageable amount to cover college expenses can be a good plan. However, the key word is “manageable.” All loans are not created equal. Federal student loans tend to have the lowest interest rates, and, for some types of Federal Student Loans, interest does not begin to accrue until six months after you graduate from college. Some colleges include private loans in their financial aid offers. The interest rates on private student loans are significantly higher than Federal student loans. Use caution when thinking about taking expensive private student loans, even for a “dream” college.
You‘ll want to carefully consider the types of loans your student has been offered by each college, and make sure that your child understands the full cost of his or her loans, including loan origination fees and interest costs over the life of the loan.
Parent Loans: To help American parents pay their expected share of college expenses, the Federal government also offers loans for parents called PLUS loans. Parent PLUS loans, if used wisely, can help cover your family EFC if you don‘t have sav- ings or income to pay the full EFC. But, keep in mind that interest and monthly payments begin as soon as you sign for a PLUS loan. Again, you can turn down any PLUS loans in your financial aid offers, but you will need to make up the difference out of pocket and it’s always smart to under- stand the terms and interest rate if you do borrow.
Federal Work Study: To help students pay for personal expenses and books, many colleges include a work study amount in their financial aid offers. Federal Work Study is an on campus job that allows the student to earn up to the amount of the Work Study award. Students receive the Work Study amount only if they get a work study job and work enough hours to earn the full amount. If your child does not find a Work Study job, or doesn‘t put in enough hours to earn the full amount, you will not get the amount shown on your financial aid offer and your family will need to make up the difference from other sources. Work Study also won‘t be available to pay for books or other expenses until your student finds a job and starts getting their paycheck. However, a Work Study job is a great opportunity for your child to start building a resume, and studies have found that students who work 10 to 15 hours a week (the typical work study job) tend to get better grades in college.
For each college, add up the total for your EFC, loans, and Work Study in your financial aid offer and then subtract the total from your cost of attendance for the school. The result is your family’s total “out-of-pocket” cost for the college.
Step 3: Consider the “free” money in each financial aid offer
After you‘ve carefully compared your family‘s out of pocket costs – EFC, loans, and work study – turn your attention to the “free” money each college is offering. This includes grants and merit scholarships. Grants are like a discount on the total cost of attendance; they do not have to be paid back or earned. Grants in your financial aid package may include those given by the individual college (often called institutional grants) or by Federal and State programs. While it‘s great to also be offered a scholarship, you should know that usually there are requirements for the minimum GPA a student must maintain in order to keep the scholarship in subsequent years; be sure you understand what’s required.
Try not to let your head be swayed solely by the grants and scholarships in your child‘s financial aid offer. When comparing financial aid offers, what matters most is your family‘s total out of pocket costs at each college from step 2. In some cases, you may find the college that offers your child the largest scholarship or the most grants may actually end up costing your family the most out of pocket.
Comparing financial aid offers accurately and realistically isn’t always easy, but it’s an important last step in your family‘s college admissions journey. Don’t hesitate to call college financial aid offices or speak to your advisor if you have any questions or need help understanding your financial aid offer. Once you have a clear idea of what each college will cost for the next four years, you can decide as a family which choice makes the most sense. And that‘s always a smart decision.
