By Arman Rousta
Why is college becoming so unaffordable and why is figuring out how to finance it so complex? If you thought doing your taxes was daunting, you must not have ever filled out a FAFSA form for financial aid. It seems as if there is a conspiracy going on, between schools, government and banks, with purpose of maximizing income for all of these parties while draining families of every last dollar of savings and income, not to mention forcing upon them enormous loans. Let us take a look at what is happening out there right now:
- Very few families understand the financial aid system, and if they do, it is usually too late to do anything about it.
- Some parents are good planners and savers, but most are not - all statistics support this fact.
- Children often receive gifts from other family members throughout the years that accumulate in savings funds.
- Upon college age, children with gifts and savings are penalized heavily by the financial aid system, and are thereby forced to pay full tuition out of pocket.
- Whatever families cannot pay, they must take out loans to cover, which on top of mortgage bills and the rest, are no piece of cake to pay off.
- Those that did not save are not penalized, but still must take out loans to cover college costs, unless they are among the less than 2% of applicants who are privileged enough to receive some form of scholarships.
- Many students typically leave college with $20,000+ in debt, giving banks a slew of young newly wage-earning customers every year.
So how is a family to deal with this dilemma? Well, they can start by understanding the process at least several years in advance. There are some simple and reasonable financial strategies which families could take in order to increase their chances of receiving financial aid. It is recommended that students apply for financial aid every year, especially since financial circumstances and eligibility certainly change.
Families are granted financial aid based primarily on their Expected Family Contribution (EFC), a calculation performed by the Free Application for Federal Student Aid (FAFSA), which students must submit in order to apply for the following types of federal financial aid:
Stafford Loan and work-study
All state schools
Many non-state school
The College Boards' CSS PROFILE form is required by some private colleges and universities in addition to the FAFSA, for additional information. Lastly, some private colleges also require their own specific forms.
Remember, even if you qualify for financial aid, it typically comes in several forms, and what breakdown you receive depends on the university and your family's financial status:
There are financial aid consultants who charge $1,000 & up in order to take the headache of applying for aid off of your hands, which may be worth it if you are mathematically challenged. Further, software programs are also available to assist the Do-It-Yourself types in the process for a more affordable rate of $50-$100 (click here to learn more). Or you can go it alone, armed with a basic knowledge of how the system takes certain factors, like your assets and income, into account. Whatever you do, if you have children at or are a student of college age, apply early, as much aid is awarded on a first come-first serve basis!
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