It’s no secret: the cost of college has exploded in recent years and has continued to rise. In 2017 – 2018, the average cost of tuition for a private college or university was $41,727. For a public out-of-state university, the average tuition was $26,010. For a public in-state university, the average tuition was $10,691. This compares to $27,948, $16,710, and $6,478, respectively from a decade ago.
Given these skyrocketing costs, many college students turn to financial aid in order to pay for school. This becomes even more common if they choose to attend an expensive private college or out-of-state public university.
There are a number of types of financial aid from scholarships and grants to federal and private student loans. Prospective students should carefully consider how they approach financial aid. Some forms of financial aid offer advantages over others, and it literally pays to get it right.
Developing a strategy for your financial aid applications can help you save a significant amount of money — and reduce the overall cost of college. Below, learn more about the different types of aid available as you put together a blueprint for financial aid success.
Federal Financial Aid
The first step that every prospective college student should take is filling out the Free Application for Federal Student Aid, or FAFSA. The FAFSA is the form used by the U.S. Department of Education and colleges when considering your overall higher education financial aid needs. Since colleges take it into consideration, it is important to fill out the FAFSA even if you do not plan on using federal student loans.
To fill out the FAFSA, students should visit the FAFSA homepage to get started. Your college or university will put together a financial aid package based on the FAFSA application. Considering this package should always be the starting point for financial aid.
Well, why is that? There are a number of financial aid options offered by the federal government, and these come with unique benefits in many cases. On top of this, colleges may offer an additional financial aid package on top of a federal offering which should also be considered which we’ll discuss later.
Some borrowers may find they qualify for financial aid grants, such as the Pell Grant, which are great options that don’t require repayment.
There are also a number of federal student loans available to student borrowers, including direct subsidized loans, direct unsubsidized loans and direct PLUS loans. These loans typically come with benefits that are not offered on private student loans. For instance, federal student loans come with income-driven repayment options, a six-month grace period after graduation, the potential for student loan forgiveness, among other benefits.
The drawback to federal financial aid is the limitation on how much you can borrow. This is based off your expected family contribution, so if your family has a high income, then you may not be eligible to borrow as much as you need.
Scholarships and Grants
Scholarships and grants should always be near the top of the list for any college student. Unlike loans, they don’t need to be repaid. That makes them the most attractive form of financial aid. The only reason that scholarships and grants are not listed first on the list is because the FAFSA is often a prerequisite to applying, particularly for certain federal grants.
While some grants are awarded through the FAFSA, most scholarship and grant opportunities require an individual application. Scholarships and grants are competitive, so you should try to apply to them early and often.
You can win a scholarship for various different reasons. Some are based on merit, while others are based on financial need or even a specific characteristic such as career path. When you are looking for a scholarship or grant, you should think about your set of skills and interests. There is probably a scholarship that fits your background.
To get started, students should search online for scholarships or grants. Many online databases allow students to find plenty of scholarships or grants. While applying for scholarships and grants can be time-consuming, it will be worth it if you receive what is essentially “free” money for college.
State or School Aid
The next priority on your list should be financial aid that you receive from your state or your college. As mentioned, eligibility is determined based on the FAFSA, which makes it all the more important that students fill out this form each year.
Many states offer financial aid specifically for students attending college in their state. This might come in the form of grants, scholarships, or state-specific loan programs. Be sure to consult with the financial aid office at your college to determine if there is any state financial aid available to you as part of your overall financial aid package.
In addition to your pre-determined FAFSA package, be sure to double check other financial aid opportunities from your college or university. This can come in many forms, from work-study opportunities to more grants or scholarships. The only drawback of both school and state financial aid is that it tends to be need-based, so you may be out of luck if you don’t fit those requirements.
Private Student Loans
As a last resort, college students can rely on private student loans. In a pinch, private student loans can make the difference between covering tuition and staying home. However, while these loans have their uses, they tend to be the more expensive and unforgiving option.
The main benefit of private student loans is that they are available in an amount up the cost of attendance. This means that private student loans will cover what’s rest of the cost of college if no other option is available. It should be reiterated that they are by far the costlier option when it comes it financial aid. Private student loans tend to have higher interest rates and fewer protections than federal student loans. For this reason, they should be lower on the priority list.
To apply for a private loan, you need to submit an application with an individual private lender. This private lender then reviews your credit profile to make an approve-decline decision. This could pose another problem if you don’t have a high credit rating. You may need to rely on a cosigner if this is an issue with your application.
Paying for college may seem like a daunting task, but it is very doable with some hard work and dedication. By prioritizing a number of options for financial aid, you can reduce the cost of college and your total student loan debt.
Andrew Rombach is with LendEDU