Costs & Financial Aid

There is no escaping the fact that college costs are rising. According to recently released reports, most students and their families can expect to pay, on average, from $112 to $1,190 more than last year for this year's tuition and fees, depending on the type of college.

Still, there is good news. There is more financial aid available than ever before - more than $135 billion. And, despite all of these college cost increases, a college education remains an affordable choice for most families.

"Sticker Price" vs. Affordability

Although some of the college price tags you hear about can be discouraging - $30,000 or more for yearly tuition and fees - most colleges are more affordable than you might think. For example, did you know that about 60 percent of students attending four-year schools pay less than $6,000 for tuition and fees? After grants are taken into consideration, the net price the average undergraduate pays for a college education is significantly lower than the published tuition and fees. And remember, financial aid will further reduce the amount your family will actually pay.

Financial Aid Makes College Affordable for You

Financial aid is intended to make up the difference between what your family can afford to pay and what college costs. More than half of the students currently enrolled in college receive some sort of financial aid to help pay college costs.

The financial aid system is based on the goal of equal access - that anyone should be able to attend college, regardless of financial circumstances. Here's how the system works: Students and their families are expected to contribute to the cost of college to the extent that they're able. If a family is unable to contribute the entire cost, financial aid is available to bridge the gap.

The EFC Works in Your Favor

The amount your family is able to contribute is frequently referred to as the Expected Family Contribution, or EFC. The figure is determined by whoever is awarding the aid - usually the federal government or individual colleges and universities.

The federal government and financial aid offices use "need formulas" that analyze your family's financial circumstances (things like income, asset, and family size) and compare them proportionally with other families' financial circumstances.

Most families can't pay the EFC out of current income alone. But, not to worry - the formulas assume that families will meet their contribution through a combination of savings, current income and borrowing. Second, financial aid is limited. The formulas therefore measure a particular family's ability to pay against other families' ability to pay.

Don't Rule Out Colleges with Higher Costs

Say your EFC is $5,000. At a college with a total cost of $8,000, you'd be eligible for up to $3,000 in financial aid. At a college with a total cost of $25,000, you'd be eligible for up to $20,000 in aid. In other words, your family would be asked to contribute the same amount at both colleges.

Visit Adventures in Education for more information on the average costs for different types of colleges.

Current Average College Costs

The price of a college education may seem overwhelming. But remember, your costs will be much lower with financial aid. Community colleges and in-state colleges are usually the least expensive, and public colleges are usually less expensive than private schools. Here are some general costs for a college education:

Tuition and Fees

• Costs range from $7,000 per year for a two-year public college up to $26,000-plus for a four-year college. Private universities can cost from $45,000 to hundreds of thousands of dollars per year.

Books and Supplies

• Cost is generally between $1,000 and $1,500 per year.

Room and Board

• Costs range from $7,300-plus per year for a two-year public college to $7,750 for a four-year public college up to $9,000-plus for a four-year private college.

Transportation

• Costs average around $1,000 to $1,500 per year.

Miscellaneous

• Costs can range from $1,400 to over $2,000 per year, depending on factors like whether the school is in a small-town or big-city environment.

Many families receive financial aid to help pay for their child's college education, and sometimes aid can cover all the cost. Learn about the many financial aid resources available to families like yours. Together with your child, you can make college a reality!

Did You Know?

• About 60% of students attending public four-year colleges pay less than $6,000 for tuition and fees per year.
• 44% of all students attend two-year colleges. The average two-year public college student receives grant aid that reduces the average tuition to about $400.
• A record $135 billion in financial aid is available to students and their families.
• About 60% of all college students receive grant aid averaging $1,800 per student at two-year public colleges, $3,300 at four-year public colleges and $9,600 at private four-year colleges.

Visit Adventures in Education for more information on the average costs for different types of colleges.

Financial Aid: Lots of Options

Financial aid is any type of assistance used to pay college costs that is based on financial need.

The U.S. Department of Education's Federal Student Aid (FSA) programs are the largest source of student aid in America. These programs provide more than $80 billion a year in grants, loans and work-study assistance. Learn more about FSA and how to apply for this aid at www.federalstudentaid.ed.gov.

Often the first step in seeking financial aid for higher education is filling out the Free Application for Federal Student Aid (FAFSA). Fill out the FAFSA online at www.fafsa.ed.gov.

The National Association of Student Financial Aid Administrators offers a range of resources to help students, parents and counselors navigate the college aid process. For information, visit their website at www.nasfaa.org.

There are three main types of financial aid:

• Grants and Scholarships. Also called gift aid, grants don't have to be repaid and you don't need to work to earn them. Grant aid comes from federal and state governments and from individual colleges. Scholarships are usually awarded based on merit. Click on these links to find out if your student is eligible for a Federal Pell Grant or Academic Competitiveness Grant. To search for scholarships, visit www.fastweb.com.
• Work. Student employment and work-study aid helps students pay for education costs such as books, supplies and personal expenses. Work-study is a federal program that provides students with part-time employment to help meet their financial needs and give them work experience.
• Loans. Most financial aid (54%) comes in the form of loans to students or parents, aid that must be repaid. Most loans that are awarded based on financial need are low-interest loans sponsored by the federal government. These loans are subsidized by the government so no interest accrues until you begin repayment after you graduate.

More About Loans

There are many different types of loans, both for students and for parents to take on behalf of the student. Read on for the basics.

Parent Loans

Federal PLUS Loans

The PLUS Loan program is the largest source of parent loans. Parents can borrow up to the full cost of attendance minus any aid received, and repayment starts 60 days after money is paid to college.

Private parent Loans

A number of lenders and other financial institutions offer private education loans for parents. These loans usually carry a higher interest rate than PLUS Loans.

College-Sponsored Loans

A small number of colleges offer their own parent loans, usually at a better rate than PLUS. Check each college's aid materials to see if such loans are available.

Federal Student Loans

Perkins Loans

Perkins Loans are need-based loans and are awarded by the financial aid office to students with the highest need. The interest rate is very low -- 5 percent -- and you don't make any loan payments while in school.

Subsidized Stafford or Direct Loans

Subsidized Stafford Loans are need-based loans with interest rates in the 4-6 percent range. The federal government pays the yearly interest while you're in school. This is why they're called "subsidized" loans.

Unsubsidized Stafford or Direct Loans

Unsubsidized Stafford Loans aren't based on financial need and can be used to help pay the family share of costs. You're responsible for paying interest on the loan while in school. You may choose to capitalize the interest. The advantage of doing this is that no interest payments are required. The disadvantage is that the interest is added to the loan, meaning that you will repay more money to the lender.

Grad PLUS Loans

This is a student loan for graduate students sponsored by the federal government that is unrelated to need. Generally, students can borrow Grad PLUS loans up to the total cost of education, minus any aid received. The advantage of this loan is that it allows for greater borrowing capacity. However, we recommend that students consider lower-interest loans, such as the Subsidized Stafford or Unsubsidized loans prior to taking out a Grad PLUS loan.

Other Student Loan Options

Private Student Loans

A number of lenders and other financial institutions offer private education loans to students. These loans are not subsidized and usually carry a higher interest rate than the federal need-based loans. The College Board private loan program is an example of a private education loan for students.

College-Sponsored Loans

Some colleges have their own loan funds. Interest rates may be lower than federal student loans. Read the college's financial aid information.

Other Loans

Besides setting up scholarships, some private organizations and foundations have loan programs as well. Borrowing terms may be quite favorable. You can use Scholarship Search to find these.

Visit Adventures in Education for more information on financial aid.