1/17/2014 10:22:00 AM College financial planning: Start early, don't relent
Marylhurst University photo
Students at Marylhurst talk during a break at orientation. It's possible to get creative to afford college.
University of Portland photo
University of Portland students talk between classes. Financial aid experts at the school say students should apply to as many scholarships as possible.
Top three tips for making college affordable
1. Apply for any and all scholarships for which you are qualified to receive. The best way to pay for college is with free money. It is important to apply for scholarships each and every year, not just your senior year in high school.
2. Utilize monthly payment plans instead of borrowing, if possible. Many families find success in using a variety of resources: their savings, a payment plan and/or loans. 3. Limit your costs and set a budget. Many students get in trouble by not setting and sticking to a budget while they are in school. Tuition and fees are fixed costs, whereas monthly personal expenses can be managed and limited.
— From the financial aid office at University of Portland
This is the first in a series on finances for 2014. Future stories will decode insurance, explore retirement planning and develop strategies for taming debt.
College costs dearly, but spending on school is a good investment, because education can open doors to future economic success. Median income for a worker with a bachelor’s degree was 74 percent higher than for a worker with a high school diploma alone. Over a lifetime working career, the difference can total more than $800,000. That's to say nothing about the intangible human and spiritual benefits of a college education.
Experts in college financing boil down their advice to two tips: Start saving early and apply like crazy for loans, grants and scholarships, also starting early.
Most of all, experts say with a comforting tone, what seems overwhelming to most families might be easier than you think with some good planning.
• Tax-free savings
States offer tax-sheltered accounts so parents can save for college, starting at birth. Like a 401(k) plan for retirement savings, a 529 college savings plan grows tax-free. The money will never be taxed by the federal government or the state if it is used for qualified higher education expenses. The Oregon College Savings Plan allows $4,455 per year to be invested in accounts.
The plan offers 15 different portfolios, from risky to guaranteed. The standard strategy is to take risk when the child is younger and get more conservative as college gets closer. The money can be used at eligible institutions in any state, including public and private colleges and universities, graduate and post-graduate schools, community colleges, and some proprietary and vocational schools.
• The Big Form
Around Jan. 1, the parents of most high school seniors and college students will be holed up with their computers, filling out the Free Application for Federal Student Aid, or FAFSA. Don't make the mistake of assuming you earn too much or won't be eligible for anything. Many families, even those with higher incomes, are eligible for some type of aid, whether loans, grants or scholarships.
It's important to file FAFSA as soon after Jan. 1 as possible. State and college-based financial aid is given out on a first-come, first-served basis.
To submit electronically, which is the fastest way, the student and one parent should previously obtain a personal identification number so the form can be signed electronically. Also, have handy the codes for the schools you'd like to list. Have your federal tax return, Social Security numbers, the student's driver's license number, current bank statements, investment statements, mortgage information and untaxed income statements: 1099 forms, untaxed Social Security income, child support received, veterans benefits, etc. You could even fill out a previous year's form as a reference to help you during that hazy Jan. 1 period.
Don't leave anything blank. If the question does not apply to you, place a zero or N/A. That way, processors won't think you have missed a question and delay your application. Keep a copy and get verification of when the application went through. If you mail the form, use delivery confirmation.
Remember that the FAFSA may not ask everything you should tell processors, like caring for an elderly parent, big medical bills, or private school tuition for a sibling. These things can be articulated in the special circumstance notice.
• There's money out there
All kinds of students get gift aid, the kind one does not need to pay back. Grants are awarded based on financial need and scholarships for academic achievement. So, studying hard and getting good grades is a fine way to make college affordable. "Those with a 3.5 GPA or higher are in a much better position," says Nancy Parks, the dean of college advisors at Oregon Catholic high schools. She started at La Salle Prep in 1967 and is now at Blanchet Catholic in Salem.
Grants and scholarships come both from the government (Pell Grant and state grants) and from the colleges themselves. In addition, many philanthropic organizations offer scholarships, including the Knights of Columbus and the National Catholic Society of Foresters. There is even a scholarship for Italian American Catholics and an essay prize on promoting world peace. Companies and labor unions give scholarships, as does Rotary International and other fraternal groups.
The FAFSA will make students eligible for federal grants, but it will take work to track down college and private grants and scholarships. The high school counselor can help. There are free online search engines, like the College Board's Scholarship Search. "Too many people assume it's too much work and that they won't qualify," says Tracy Reisinger, financial aid director at Marylhurst University near Lake Oswego. "People get intimidated by the process."
Apply for scholarships early, experts say. Many have deadlines in January, February and March.
"If you wait, you may miss out," Reisinger says.
States like to keep their brightest within the borders, so there are more scholarships for in-state students. The website getcollegefunds.org has more than 450 scholarships for Oregon students who choose Oregon colleges.
There are other ways to save money. Marylhurst University serves a non-traditional undergraduate population, with some students returning to finish college. The school often has students do preliminary work at community colleges and also has a program in which life experience can count for credit, again bringing savings.
"I always tell kids there are lots of ways to get there," says Parks at Blanchet in Salem. Blanchet seniors this year have been offered a total of $6.2 million in grants and scholarships. Students with a good GPA and good test scores can get merit pay at colleges, which compete for top students.
Parks advises seniors to apply to the schools of their dreams, but also have one on the list that they can get into and afford.
Some students can start higher education without tuition; Chemeketa Community College offers two years free for students from Salem and Keizer who post a 3.5 grade-point average or better. Many students then finish up at a four-year school.
Tyrone Stammers, college counselor at La Salle Prep in Milwaukie, urges research to find the schools that match a student's grades. That makes scholarships more likely.
"There may be solid B students who envision themselves at Stanford," Stammers says. "We encourage them to apply and pursue that, but also to look at places that match their academic ability and open up doors for scholarships. There are 3,000 universities in the U.S., but students focus on ones they see on Saturdays on NCAA football or basketball." Some scholarships, he explains, will be particular to a major or planned career. Others focus on leadership.
"There are endless numbers of scholarships," says Stammers. "But it takes a lot of energy. They don't just drop out of the sky."
In the end, grants and scholarships rarely cover the entire cost of college. Loans, family savings and work study are part of the picture for most families. But it all works.
"If you need the extra money, a student loan is much better than putting something on your credit card," says Myra Smith, executive director of Financial Aid Services for the College Board.
Trustworthy websites for college financing: Getcollegefunds.org bigfuture.collegeboard.org/