January finds most seniors waiting for their financial aid award letters. Some colleges were quick to get the letters out because the majority of their aid comes in the form of merit-based aid — so they didn’t need to wait for the student’s Free Application for Federal Student Aid (FAFSA). By this time it is imperative that the FAFSA be completed, since many schools determine their financial need-based aid on the FAFSA.

The FAFSA is important because it is used to determine federal aid: the Pell Grant for low income students, eligibility for subsidized and unsubsidized Stafford Loans, as well as small state grants. The FAFSA awards money to students primarily based on their families’ current income and savings, not counting retirement savings, the value of your primary residence, personal property and life insurance policies.

The College Board CSS Profile form is used by more than 200 private colleges and a few public colleges — including University of Michigan — to determine a student’s eligibility for the schools’ own need-based scholarships and grants. Many of these colleges try to cover all of a student’s need. The CSS Profile utilizes three years of income information in the expected family contribution (EFC) calculation.

Both the FAFSA and the CSS Profile determine the student’s EFC toward the cost of college. The student’s EFC is the minimum amount the student is expected to contribute toward the cost of college. The formula used to determine the EFC utilizes data on the assets and income of the parents and student, family size and the number of dependent children enrolled in college in a given year to determine the family’s ability to pay for college using the income and assets that they have. The EFC produced from the FAFSA and CSS Profile generally will not be the same because they each have different formulas used for the calculation.

Once the FAFSA (and CSS Profile, if required) are submitted, the college will generate a financial aid award letter. The award letter will include the total cost of attendance to enroll for the upcoming academic year, including tuition, fees, room, board, books, travel and personal expenses. Students have until May 1 to make their choice — so they have time to compare the costs to help determine which school is best for them.

Most families are shocked when they receive this letter. The most common question from families is “Where is the financial aid?”

By completing the FAFSA, students will be eligible to apply for the Stafford Direct Student Loan. A freshman can borrow $5,500, a sophomore can borrow $6,500 and juniors and seniors can borrow $7,500. If a fifth year of school is necessary — there is an additional $4,000 available to borrow. If a family needs to borrow more than the amount available through the Stafford Loan, there are several options.

The Direct PLUS loan offered by the Federal Government is available to parents who are eligible. The PLUS loan requires a credit check and for those who don’t qualify because of their credit. There are several options that may help — including obtaining an endorser or documenting to the U.S. Department of Education the extenuating circumstances for the adverse credit. Direct PLUS loans are available up to the cost of attendance, less any financial aid received.

Private student loans, which require a cosigner, also are available to students who qualify. There are many lenders out there — so it is important to complete due diligence to determine which is the best option. It is important to consider the interest rates, loan origination fees, repayment options and what assistance is available if you have a difficult time making the minimum payments.

One way to make college more affordable is to apply for, and win, scholarships. Each student should check with the college they are applying to in order to determine the deadlines for any scholarship they can apply to, or determine if there are any scholarship competitions they should attend.

Locally, the Grand Traverse Regional Community Foundation awards scholarships each year. Visit www.gtrcf.org/scholarships for details and deadlines — applications become available late this month or early February, but your student can review the scholarships and requirements now. In addition, there are many free, national websites to visit to find scholarships including fastweb.com, myscholly.com, petersons.com and https://bigfuture.collegeboard.org/scholarship-search. By considering applying for scholarships a part time job, your student could end up getting paid thousands of dollars.

Most families ask the question, “Whose responsibility is it to pay for college?” The higher education financing system, constrained by limited federal-aid dollars, is structured to rely on families as the foremost funders of a student’s education. The federal financial-aid system isn’t designed for children to handle college costs on their own. Generally, students aren’t considered independent from their parents for financial-aid purposes until they’re 24 years old or have an event that signals adulthood, such as military service, a marriage or having a child they support.

Whether parents decide to cover a student’s entire tuition, some of it or none of it — the decision ultimately is up to parents and their children. At the very least, students should have an understanding of what college costs and what help is out there (beyond what their parents do or don’t contribute) — in the form of scholarships, student loans, grants, work study, etc.

A college education is becoming difficult for families to finance, even for well-planned parents and students. Families often call to voice their concern that they can’t afford to pay for college and wonder if they are legally obligated to pay. Thankfully, for some of these families, that is not the case.

Vicki L. Beam is a college planner at Michigan College Planning located in Traverse City. She encourages questions and comments about future columns. Contact Michigan College Planning at 231-947-0203, by email at vicki@michigancollegeplanning.com and at www.michigancollegeplanning.com.

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