We all love lists—”The Top 10 Things to Do Before You Start Your College List”; “The Top 5 Terms to Know Before You Apply to a College”; “The Top 3 Interview Tips For Your College Interview,” and more.
But before you start making lists and crossing off each item, there is ONE thing you should really do before searching for colleges: Make sure you understand the financial aspects of the college process.
Terms to Know in the College Process
It won’t be long before you realize there are acronyms flying around on websites and on college forms. FAFSA (Free Application for Federal Student Aid), SAT and ACT (standardized tests), EA and ED (Early Action and Early Decision) and more. But it’s crucial that you understand the key financial terms used and how they will affect what you pay for college.
- EFC – Expected Family Contribution – This is the amount of money the government believes that a family should be able to pay for college based on the information provided on the FAFSA. It may not be what you can afford to pay but it’s the figure that colleges will use when awarding financial aid to your student.
- COA – Cost of Attendance – The COA is the average cost to attend for one academic year (fall through spring). It includes tuition and fees, books and supplies, room and board, transportation, and personal expenses. The college subtracts your EFC from the COA to calculate your need for financial aid.
- Net price – Your net price is a college’s sticker price for tuition and fees minus the grants, scholarships, and education tax benefits you receive. The net price you pay for a college is specific to you because it’s based on your personal circumstances and the college’s financial aid policies.
- The net price, on average, is considerably lower than the published price.
Statistics to Know in the College Process
For many students, college is an emotional decision—the look of the school, the feeling they get when they visit, or even a college with a strong football program. But you should never overlook the financial investment. Numbers aren’t everything but consider these important statistics when you and your student are looking at schools.
- Percentage of financial need met—If your student needs financial aid to attend college, these statistics are important. How much aid a college awards to its students is reported and tabulated each year. If your student needs financial aid, a college with a low percentage of merit aid might be eliminated from your list.
- Average indebtedness—Even if a student graduates, it’s no guarantee they will secure a job; at least not one that will pay enough to cover too much student loan debt. If the average student indebtedness is high at any college, and your student needs financial aid, this college might not make the final list.
- Graduation rates—When you research the college, look up their graduation rates. How long does the average student take to graduate? Graduation rates are reported two ways, as the percentage of full-time students who graduate in four years and the percentage who graduate in six years. The longer a student takes to graduate, the more expensive the degree.
Financial Aspects of the College Process
There are two types of aid awarded to students: need-based aid and merit-based aid. Colleges award aid based on the figures provided on the FAFSA.
- Need-based aid—Federal student aid is need-based. That means it doesn’t discriminate by any factor apart from financial need. Eligibility is based solely on the assets and income of the prospective student and his or her family. Factors such as test scores or GPA have no bearing on need-based aid.
- Merit-based aid—Merit-based aid includes a variety of talents and interests: academic, artistic, athletic, and more. Scholarships are the most common type of merit-based aid which may come from the school itself or from outside sources. A student with extensive assets and income is just as entitled to a merit-based award as a student with limited assets and income. For more information on scholarships, you can read these two articles: Strategies for Finding Local Scholarships and Can You Prevent Scholarship Displacement.
Understand the Loan Process
There are two types of loans you can use to pay for college: federal loans and private loans. Federal loans consist of student loans, subsidized and unsubsidized, and parent loans.
Federal loan interest rates can sometimes be lower than private loans (but NOT always!), and offer options for deferment and forbearance after graduation. If you make the choice to borrow from a private lender, understand your options and compare lenders.
It is key to know all the Critical Information on How Student Loans Work.
Understand the Financial Aid Process
If your student needs help paying for college, the financial aid award letter is just as important as the letter of acceptance from the college. It will arrive either with the offer of admission or shortly after your student receives their offer.
Within the award letter you will find the cost of attending the college, what you will be expected to pay and any financial assistance the college is offering to bridge the gap between what you are expected to pay and the cost of attendance.
Colleges use these awards to lure students to accept their offer of admission and often to discourage students from accepting. Familiarizing yourself with the components of the award letter and terms like “gapping” and “frontloading” really helps in Understanding the Financial Aid Appeal Process.
Finally, if it’s important to find an affordable college, The College Free Money Finder will help your student find colleges that are matched to their specific needs and more generous with their money. You can also use The College Data Spreadsheet to help you create a college list using the important statistics listed above.
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Suzanne Shaffer counsels parents and students in the college admissions process and the importance of early college preparation. Her Parenting for College blog offers timely college tips for parents and students, as well as providing parents with the resources necessary to help their college-bound teens navigate the college maze.