3 higher education experts share their advice

  • Make affordability a key consideration when compiling the list of schools that interest you.
  • Grants, merit awards, and athletic scholarships are all sources of funding that you don’t have to repay.
  • This article is part of the “Better, Smarter, Faster” series focusing on the impactful choices you can make with your money to achieve big life goals.

With the cost of a college education rising year by year, more and more families are forced to consider borrowing money to pay. Although loans can be a necessary evil in some scenarios, these steps could help people determine if they can afford schools out of pocket.

How should you incorporate finance into your college search?

Your financial situation should be at the center of your decision-making process.

Neeta Vallab is the founder of MeritMore, a research tool that allows students to estimate the amount of merit aid they could receive from particular schools based on their GPA and test scores. She said the most strategic way to avoid student loans is to apply to multiple schools that make financial sense for you.

Follow traditional college search advice and research schools whose fields of study and student organizations interest you. Also keep in mind that affordability is a factor you need to consider.

“Don’t start with the notion of a dream school,” Vallab said. “It’s important to not be able to become so emotionally invested in a particular school as you may need to make adjustments based on finances. Keep an open mind when entering that there are many good schools, there are many great schools, and then you spread out your expectations.”

Most students are familiar with the concept of school safety, targeting, and reaching as a means of matching their school profile to the likelihood of acceptance into different schools. Vallab said they can also apply this mindset to their financial compatibility with schools.

“In addition to thinking about the likelihood of acceptance, you should also think about financial adequacy,” Vallab said. “You should assign affordable, stretchy, and painful labels to your finances. And then when you look at your list and you have a good list of schools that are affordable or are going to be overkill, but you understand that going into that process , then you are better prepared when it comes to accepting an offer.”

What options do you have for saving for college?

The sooner you start preparing for the cost of college, the more time you have to build up a war chest to pay for your education.

Dawn Dahlby, founder and president of advisory firm Relevé Financial Group, said planning for college funding starts with small, consistent actions. The compounded returns from your savings or investments help make that final bill more palatable, she said.

“When you look at a big bill like college, it’s overwhelming,” Dahlby said. “People are starting to get really scared, and it’s creating anxiety for them. And the only way to take that fear and that anxiety and the stress out of that big bill is to do some comprehensive planning.”

When saving money for college, families often choose one of two popular options:

529 blueprint

A 529 plan is a specialized savings account designed to cover college expenses. The account owner designates a beneficiary, and money in the account can be used tax-free for eligible education expenses, such as tuition, books, room and board.

The money in your account will grow depending on the type of investment you select (usually mutual funds or exchange-traded funds, ranging from conservative to aggressive). You might also be able to choose a portfolio with a target date that matches your child’s age. These wallets become more conservative as your child approaches college age.

“A 529 plan can help families create a financial plan that covers those high college fees,” said Amanda Push, higher education expert at Student Loan Hero. “It also allows you to get a better return on your money than if you just put that money in a regular savings account.”

Traditional or High Yield Savings Account

The banks and

credit unions

offer traditional dishes or

high yield savings accounts

, which earn marginal returns and are federally insured. Your money won’t have the potential to grow the way it would if you put it in a 529 plan or brokerage account, but you’re also guaranteed not to lose value.

What are grants and scholarships?

Grants and scholarships are sources of free money that generally do not have to be repaid. You can get grants designed for specific groups from the federal government.

There are two scholarships for students with exceptional financial need, one for students who commit to teaching for four years at a low-income school and another for students whose parent or guardian died in military service in Iraq or Afghanistan. Learn more about types of federal grants here.

Excellence scholarships are often awarded based on outstanding academic performance and can help you pay for college without taking out a loan. Stellar performance may include a high grade point average, excellent ACT or SAT scores, or other outstanding academic achievement.

Vallab said students who are in the top quartile of scores and GPA for a particular school are generally good candidates for merit aid. If you think you qualify, write down the average amount of merit aid given by the school. If an award of this size doesn’t really help cover the cost of this school, you might want to cross it off your list.

Athletics scholarships are often awarded on the basis of outstanding athletic performance and usually require you to play one or more sports to qualify. Standards for athletic scholarships vary by school. Schools may also have varying amounts of money available for specific sports.

How to get more money?

After receiving financial aid offers from multiple schools, you can negotiate the amount of money you received from the schools and pit the offers against each other.

The Vallab website offers a tool for students to compare financial aid offers from different schools side-by-side, as well as an appeal letter generator that allows families to create customizable appeals.

“It’s very difficult to ask anyone for money, first of all, and you’re also in a situation where you’re just grateful that you came in,” Vallab said. “But it’s something colleges expect. They don’t publicize it, but it’s something families can use, and you can get a significant amount of money out of your personal expenses.”

Students looking for cheaper options can also consider a community college, which typically costs less than many universities. In-state tuition also tends to be more affordable than out-of-state tuition, so local schools might be a good place to start your search for a college in your price range. . Consider taking Advanced Placement and Dual Enrollment courses in high school to reduce the number of credits you need to earn at a four-year college.

What if you’ve exhausted other options and need a loan?

Sometimes, even if you have planned your college payments well, you have no choice but to consider a loan.

“A lot of people end up in a position where they have to take out student loans, and that’s totally okay,” Push said. “It’s not a failure on the part of the student or the family. Tuition, room and board are extremely expensive. Sometimes taking out a loan is the right path for some students and families.”

Federal student loans should always come before private student loans. They have the lowest interest rates and come with a level of protection that private lenders don’t offer.

Consider the federal student loan forbearance the government has offered during the pandemic. While private lenders may have offered their own help to those in difficulty, private student loan borrowers have not gained this widespread benefit or kept interest rates at 0%.

Make sure you understand the interest rate you‘re being charged, your repayment term, and the total amount of debt you’re incurring before you sign on the dotted line.

“Don’t let a lot of debt keep you from making rational decisions about how to manage that debt,” Dahlby said. “You can find out what’s available to you and work with a professional to come up with a plan so you can reduce that debt.”

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