Financial Aid: How to Make Informed Choices
After a long year of anticipation, your child's college acceptance letters have all finally arrived with the exciting news of admission. Congratulations are in order! However, before diving headfirst into the celebrations, there's a critical aspect that requires your attention: comparing the financial aid offers from all the colleges your student has been admitted to. I recognize the FAFSA information isn’t getting sent to colleges until March, but understanding how to handle those offers involves understanding the nuances of each offer to ensure that the chosen college aligns with both academic and financial goals. Here are some things to know.
How Do You Compare Offers?
Once you have all the financial aid letters in hand, a three-step process can assist your family in making a well-thought-out decision.
Step 1: Determine Total Cost of Attendance for Each College:
While colleges provide estimates covering tuition, room, board, fees, and additional costs, these may not accurately reflect your family's actual expenses. Specific factors like major-related expenses, distance from home, and local living costs can significantly impact the overall expenditure. Create your own "estimated total cost of attendance" by factoring in these elements for each college, ensuring a more accurate basis for comparison.
Step 2: Compare Your Family’s Out-of-Pocket Costs for Each School:
Understanding the components of financial aid offers is crucial to evaluating the true cost of attending each college. Examine each of the following items from every financial aid letter:
Student Aid Index (SAI)
This has replaced the Expected Family Contribution (EFC). Similar to the EFC, the SAI guides the determination of eligible aid based on parental and student income and assets.
Student Loans
Financial aid offers usually include student loans. Carefully consider the types of loans offered, as federal student loans often have lower interest rates compared to private loans. Be mindful of the full cost, including loan origination fees and interest costs over the loan's life.
Parent Loans
The Federal Government offers PLUS loans to help parents cover their expected share of college expenses. While these loans can bridge the gap if savings or income fall short, be aware that interest and monthly payments commence immediately upon signing.
Federal Work-Study
Explore work-study opportunities, as they can help cover personal expenses and books through on-campus jobs. Calculate the total of SAI, loans, and work-study for each college, subtracting it from the cost of attendance to determine the family's "out-of-pocket" cost.
Conclusion
An accurate comparison of financial aid offers is crucial for making an informed decision about your child's college education. Reach out to financial aid offices for clarification, and once you've determined costs for four years, engage your family in a thoughtful discussion to make the most sensible choice. By following these steps, you'll navigate the complexities of financial aid offers and ensure a bright and financially responsible future for your child.
