Impact of college on family finances

Strategies to lessen the impact of college on family finances

Introduction

Many are convinced that college education is an important investment yet many people have problems financing it. The college education value has increased financially hence posing a great challenge to many families. This has led to students who are financially strapped consider affordability than any other factor in choosing a college (Bowen & Bok, 1998). It is evident that the economic value of college education has increased substantially as college educated workers have higher earnings than those with a high school diploma only (Katz & Autor, n.d).

It has been observed that most people who attended elite colleges succeed in their workplaces and are more likely to give back to their community. This they do by leading civic organizations and volunteering. College education also has civic participation as a social benefit. It is argued that more individuals who are educated make good citizens. For instance, they are likely to vote than those with a high school education only (Bowen & Bok, 1998.)

This has motivated many people to source for financial aid to offset some of the tuition costs and also the government has come in to help relieve the pressure of the tuition fee. In sourcing out for college fees, students are advised to apply for scholarships and free money. They are also advised to apply for low –cost federal student loans. Below are some of the many options available to students with financial needs to aid them in paying for college education.

Institutional- Merit based scholarships

These are scholarships offered to students who have distinguished themselves in one or more areas. For instance, students who have exemplary good grades and who are among the top of their class or those who have achieved greatly in challenging courses are in most cases offered these scholarships. They are also given to a student exhibiting athletic or artistic excellence or those with a well rounded and unique personality and creativity.

Most of these scholarships are offered by the colleges and the Universities themselves. They may require more than just academic excellence. For instance, they may require some recognition by an esteemed organization, to have received some other scholarships, or have some other honorary title. The student stands a better chance to winning this kind of scholarship if heavily involved in extracurricular activities.

The merit-based scholarship may also include a demonstrated leadership potential or a community service requirement i.e. those students who can work well with a variety of people including administrators, employers and even various government and civic organizations. Some of the merit awards are offered to only those students whose families demonstrate financial need, while others are offered regardless of the family's financial background. This helps in reducing the college burden to families as it provides a full or partial tuition scholarship for the student.

Early and often application of scholarships maximizes the chance to be awarded the free money and the student is able to get through college scholarships and minimizes the amount of student loan debt one faces after completion of college.

Institution-non merit based scholarships

These are scholarships offered to interested students upon application. They are easily accessible as no merit is required upon application. To increase the chances of being awarded, the student is supposed to send the application in time, to have it very neat and no errors and also the student should be able to portray one's strengths. Such scholarships include: scholarship for African, Golf scholarship, an easy scholarship and many more.

Campus based aid

These are campus based programs which are administered directly by the financial aid office at each of the participating college. Not all colleges participate in these programs so students are advised to check with their school's financial office for the programs that the school participates in. The amount of aid received from these programs will depend on the student's financial need, the availability of funds at the school and the other amount of aid the student may have received elsewhere.

This program provides a certain amount of funds to each of the participating colleges every year which is then disbursed to the students according to their needs. Each college has its own deadline for the campus aid application and so students are advised to apply early since when the money has been disbursed no more awards can be made from the program for that year. These campus based aid include: Federal Perkins Loan program, the Federal Supplemental Opportunity Grant (FSEOG), and Federal Work-Study (FWS).

Ø Federal Perkins Loan.

This is loan offered to the undergraduate and the graduate students who are in need of financial aid. These loans have the lowest cost as they have a very low interest rate. They are part of the Campus based Aid. The loan is funded by the government's Education department and some additional funding from the schools. The loans are offered to the students according to their financial needs. The neediest students are given a much higher award.

The amount to be borrowed is determined by; other financial aid being offered, the available funds at the school and the financial need of the student. They are federally guaranteed loans of which most is paid after graduation. Students apply for these loans using the free application for students aid (FAFSA). The school lends the student this money. The school will either pay directly or apply the loan to the student's school charges (FSA Handbook for Perkins Loans)

The loan is received at least twice during the academic year. The amount received depends on the student's financial needs, the time applied, and the funding level at the school. The loan has a grace period of nine months after completing or dropping out of school before it is paid back.

Ø Federal Supplemental Educational Opportunity Grant (FSEOG)

FSEOG subsidizes further the neediest students who qualify already for the Pell Grant. This is the federal grant program for low income students offered to the participating institutions and which are directly administered by the office granting the financial aid. The funding is usually limited to each institution so the neediest students are given priority. The funds are disbursed at least twice per academic year

The amount received will depend on when applied for, the student's financial need, the financial aid office's policies at the college, and the funding at the college the student attends. Once the student is declared eligible for the aid, the school will credit the student's account. The school must pay at least once per term or semester, for the schools that do not use any of these systems; they are required to disburse the money at least twice per academic year. The Federal Supplemental Educational Opportunity Grant doesn't have to be paid back (FGPFS)

Ø Federal work study

It is a campus- based program that helps low- income students earn money to pay for college expenses through part-time jobs. It is only available at participating schools. It is a program that provides part-time jobs to financially needy students.

The federal work study may also be offered alongside grants and loans. The kind of the work study jobs offered are community service jobs that are in the public interest, jobs related to the student's major and on-campus jobs. These jobs are normally posted on the schools' website where the students can easily access them.

An undergraduate is paid on hourly basis. The money is paid directly and at least monthly. The wages paid must commensurate the current federal minimum wage. However, it might be higher depending on the skills required and the type of work done. The amount earned cannot exceed the total federal work study award. The employer considers the student's class schedule, the award amount and the academic progress when assigning work hours.

Student Loans

These are federally guaranteed loans offered to students with financial needs. The loans may either be subsidized or unsubsidized. These loans usually have low interest rates compared to those offered on the private market hence making them affordable to students.

Students' parents with good credit history may receive a Parent Loans for Undergraduate students (PLUS) loan. This applies to dependent undergraduate students enrolled at an eligible school with an eligible program.

The parents complete a PLUS loan application and promissory note which are in a single form from the school's financial aid office. The parents are also required to be credit worthy. I f the parents do not pass the credit worthiness test, they may get an endorsement from a relative or a friend who is credit worthy. The endorser is responsible for repaying for the loan if the parents fail to. The amount of loan is limited to the cost of attendance of the student less any other financial aid that may have been received. The PLUS loan's interest rate varies. The PLUS loan payments begin immediately.

If the parents are unable to meet the repayment schedule temporarily, they can receive a deferment or forbearance on their loans. The payments are reduced or postponed during forbearance.

The PLUS loans are also offered to graduate and professional degree students. They are allowed to borrow up to their cost of attendance less other financial assistance granted to them. The applicant should not have an adverse credit history. The applicants should complete the free application for federal student Aid. They are also required to have applied for their annual loan maximum eligibility under the federal subsidized and unsubsidized Stafford loan program before applying for a graduate or professional PLUS loan.

Private Loans

These are non-federal unsecured loans which are credit based and are available to the undergraduate, the graduate and the continuing students. If a student does not qualify for a private loan, the parent or the guardian may co-sign. The private student loans helps one to cover any other acceptable college expenses remaining after all other financial aid like grants, federal student loans and scholarships are not enough. These remaining college expenses may include; textbooks, rent, laptop etc.

Eligibility for a private student's loan may vary by lender. One will be required to be attending a lender-eligible school. Since also these loans are credit-based, one is required to meet credit requirements which also vary by lender. Some of the credit requirements needed may be income and employment information as well as credit history. Since most students may not meet these requirements, they can apply with a co-signer who is credit worthy in order to increase their chances of meeting the requirements of the lender.

Private student loans are in two types; school-channel and direct- to –consumer. The school channel loans take longer to process but offer low interest rates to borrowers. The school signs off on the borrowing amount, and the funds are disbursed directly to the school. The direct-to- consumer loans are not certified by the school. It is between the student and the lender. The loan award is disbursed directly to the student. The direct –to- consumer loans are accessed quickly by the borrowers though they have a higher interest rate.

Private student loans usually have variable interest rates unlike federal student loans which have fixed rates. This is because private loans are based on the credit history of the borrower. Borrowers with good credit will receive loans with lower rates and smaller origination fees loan than those with less than perfect credit. Private student loan is a good way to finance college for those families with so much income or too many assets to qualify for federal aid but not enough assets or income to pay for their children's college fee without assistance. The terms for private student loans vary from one lender to another.

Federal Aid

This is financial aid made by the government to the students. It is subject to changes in funding levels. It comes in the form of federal grants programs, federal work study programs and federal student loans. The eligibility indicator of all federal aid is the FAFSA which is available online for easy access and also to speed up processing. The FAFSA is always ready to be filled out by January first of every year. FAFSA gives information to students on how much funding they receive and also which federal programs they do not qualify for.

FACTS/NelNet Business Office Plan

FACTS organization is the leading provider of tuition payment plans, donor management, financial aid and educational planning solution. They help families and schools manage their costs better by distributing tuition payments over time. They can also bill families for incidental fees that may have accumulated throughout the year thus they are not required to send an invoice from the school office.

They offer parents multiple options for payments, for instance, credit card, paper invoices and automatic bank payments. They also offer flexible payment dates thus the schools can pick any dates for payments to offer to parents. They also offer email reminders to parents. This has increased affordability by parents. It has also given a multiple payment options that suit everyone's needs.

Applications are done online which are easy to complete, this helps to streamline the application and to cut down on paper work. It also makes it easier for one to complete very important forms. A single application can give multiple awards. FACTS organization has a secure environment which secures and protects personal information.

GI Bill and other military educational programs

This is a veteran's benefit program aimed at providing services and benefits to the veterans together with their families in recognition of their services to the Nation.

They provide educational training opportunities to the eligible dependants of the veterans. The approved trainings for the program are graduate and undergraduate degrees. They are offered up to fourty five months of education benefits. Some of the benefits offered to the veterans are dependants' educational assistance, home loans, housing allowance, college fund payment, life assurance and many others depending on each individual's situation. The college fund payment is issued to the student directly whether on full time or part time study.

Eligible veterans are those individuals who serve ninety days at least after September tenth two thousand and one (www.gibill.va.gov)

Employment Security Commission

This is a program that helps individuals drawing unemployment insurance benefits receive special consideration for financial aid to pay for education or job training. They are awarded federal Pell Grant scholarships according to their financial needs.

In order to pursue these opportunities, one should first decide on what training or education will meet one's needs. In case one needs help in applying for Pell Grant scholarships or other federal financial aid, one can contact any college or University. All these strategies assist in lessening the burden of college fee on family finances. They are easily accessible and pocket friendly on family finances.

References

FGPFS (Federal Grant Program Fact Sheet). (2010). “Understanding Grants and Loans.” Retrieved on February 11, 2010 from: http://studentaid.ed.gov/PORTALSWebApp/students/english/loanGrantFactsheets.jsp

U.S Department of Education. (2009). “Federal Supplemental Educational Opportunity Grant (FSEOG) Program.” Retrieved on February 11, 2010 from: http://www2.ed.gov/programs/fseog/index.html

Federal Student Aid. (2003). “Federal Supplemental Educational Opportunity Grant of the 2003-2004 Handbook.” Retrieved on February 11, 2010 from: http://ifap.ed.gov/sfahandbooks/0304FSAHBVOL7.html

Federal Student Aid. (2009). “Campus-Based Aid.” Retrieved on February 11, 2010 from: http://studentaid.ed.gov/PORTALSWebApp/students/english/campusaid.jsp

U.S Department of Education. (2009). Federal Perkins Loan Program. Retrieved on February 11, 2010 from: http://www2.ed.gov/programs/fpl/index.html

Council of Economic Advisers. (2000). Economic Report of the President. Government Printing Office: Washington, p. 132.

Katz, L. & Autor, H. (2008). “Changes in the Wage Structure and Earnings Inequality.” Retrieved on February 11, 2010 from: http://team.univparis1.fr/teamperso/sollogou/M2EdT/Katz_Autor_HLE.pdf.

Bowen G. & Bok, D. (1998). The Shape of the River: Long-Term Consequences of Considering Race in College and University Admissions. New York, NY: Princeton University Press.

U.S.D.V.A (United States Department of Veterans Affairs). (2009). Retrieved on February 11, 2010 from: http://www.gibill.va.gov/

FACTS. (2009). “Tuition Management.” Retrieved on February 11, 2010 from: http://www.factsmgt.com/tuition_management.aspx?id=1517&path=fac.svc.tmn

Federal Student Aid. (2009). “PLUS Loans.” Retrieved on February 11, 2010 from: http://studentaid.ed.gov/PORTALSWebApp/students/english/parentloans.jsp

Heller, D.E., & Laird, T.F.N. (1999). “Institutional need-based and non-need grants: Trends and differences among college and university sectors,” Journal of Student Financial Aid, 29(3), 1999, 7-2

Longanecker, D. (2002). “Is merit-based student aid really trumping need-based aid?” Change, 30-37

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