Getting More Financial Help for College

Many college-bound seniors have just received notice from the schools of their choice. Now it’s time to finance the adventure. When it comes to paying for college, the rules of the financial aid game are changing. Cash-strapped states are cutting the number of students who receive aid as well as the total amount of aid — and in some cases, may not be able to make good on money they’ve already promised. Here’s what you need to know.


1) Apply for aid as quickly as possible. While students officially have several months to file the Free Application for Federal Student Aid (FAFSA), the reality is you need to file immediately. A number of states, including Illinois, Kentucky, Oregon and South Carolina, announced they will dole out money on a first come-first served basis until the well is dry and have asked their citizens to file immediately. If you haven’t finished your 2010 taxes, send in an estimate using your W-2 and 1099 forms, as well as the last pay stub of the year. You can always amend the number when your return is ready.


2) Make the right comparisons: With fewer grants available, financial aid packages are likely to include more student loans (aka money that has to be paid back!) Look for the package that has more direct grants and fewer loans. In addition, when you compare offers, look for the school that offers to cover the bulk of tuition and fees with its own money, which (unlike state funds) is guaranteed for that year.


But don’t stop there. Compare the cost of a private school with an aid package to the cost of a state institution. For instance, a student may get into a private school that costs $40,000 a year with a $20,000 first-year grant. That makes it “equal” to the state college that costs $20,000. The only problem is that the $20,000 grant may not be renewed in the second year — forcing the student to either drop out or borrow heavily. (The weird rules of financial aid will make if difficult for a student to work to make up the difference.) So be sure to discuss the backup plan if your child chooses the private school and the aid isn’t renewed.


3) If your aid package is heavy on loans, ask the financial aid office about work-study programs, which offer aid in the form of part-time work (again, it doesn’t need to be paid back!)


4) Search for scholarships. In the past, financial aid practices discouraged third-party scholarships because some colleges reduced their grants in response to outside awards. But some schools will allow scholarships to substitute federal student loans in the aid package. Click here for a few tips on finding and winning scholarships.


5) Open a 529 plan. These are savings accounts designed for higher education sponsored by the states. Some states are offering cash incentives for sign ups — check out this story for more. In addition, you may get a tax benefit. Some states offer an upfront tax deduction for funds deposited into a 529 plan — with no requirements on how long the money is in the account. Parents who have some cash on hand to pay for tuition this fall could open a 529 right now, collect the tax deduction, and withdraw the money when they need it.


Depending on government loans or scholarships to get my kids through college always seemed risky to me, so I started saving when they were born. Between our savings and their part-time work we hope to be able to foot the bill by the time they get there.


What’s your approach? Save early and often — or figure it out down the road?

Laura Rowley