Evaluating Financial Situation & Award Letter
When parents realize how much college is a year, it can be quite a shock. For a fancy private university, costs for tuition, fees and room and board are up to $50,000 a year. Even a public university averages around $30,000 annually. So how do parents pay for college?
Families should evaluate how much they can afford out of their own income to pay toward a child's college. If both parents are financially stable and they will send one child to college at a time, they should be able to pay up to 10 percent of their income. However, 10 percent can be a hefty price. The rule of thumb is to not go over that 10 percent. For example, if both parents make a combined income total of $200,000, they should be able to pay $20,000 of the student's tab. However, this is not always the case.
No matter the financial situation, parents should fill out the FAFSA (Free Application for Federal Student Aid) to try and receive help from the federal government. If parents are in a situation where they are upper middle class or look wealthier on paper, they need to start examining the individual school's ability to give merit scholarships or any other type of non need-based scholarship.
Once the student receives their award letters from the schools they were accepted into, parents must examine them closely:
How much money did they give the student in grants and scholarships -- in other words, money that doesn't need to be paid back?
Did the student receive a federal Pell Grant or merit scholarship directly from the college?
What type of loans did the student receive? Subsidized government loans, which are the best, or unsubsidized government loans, which are second choice?
- Was s/he offered a federal work/study program?
It's time to take out the calculator and do the math. Did the schools and government cover all the expenses or do you have a bit of unmet need leftover? For example, let's say you have $5000 of unmet need you and your spouse must pay. Decide if you can cover this extra expense easily or if you can't, it's time to address how to meet unmet need.