Every trip to the mailbox or visit to the email inbox brings news from potential colleges for parents and high school seniors. Sometimes the news is disappointing but, when the student has been accepted to a favored college, it can be very exciting. And sometimes, when the mail contains a financial aid award letter, it can be downright confusing.
The final choice of college could affect the finances of your family and your student for many years to come, so you want to make sure you make a decision that’s just right for you. Here are several things to keep in mind as you are taking these last few steps:
• What your financial aid award letter is telling you: The letter will give you a good idea of what it costs to attend that institution. It should list an expected Cost of Attendance, or COA. These are costs the college believes the average student incurs to attend. The COA might include tuition, room and board, books, fees, and living expenses. You will then see the financial aid package the college is offering your student. Read it carefully, as you must be certain that you can distinguish between grants and scholarships that do not have to be repaid, federal student and parent loans that do have to be repaid, and federal work-study programs where your child will be required to work a certain number of hours to earn money towards an education.
• Compare financial aid award packages: Create a budget worksheet with a column for each college, and start filling in the Cost of Attendance for each. Use some of the figures provided, but think about whether your child’s expenses will be different from what is listed. Calculate travel costs back and forth for all holidays and breaks. If your child will live off-campus, add in rent and utilities. Put together a meal budget if your student won’t eat on-campus, and estimate out-of-pocket expenses for each location. Add up the total costs, and then subtract each school’s grants and scholarships, as well as any outside scholarships. Explain the work-study commitment to your child. Then subtract the federal student and parent loans to determine how much money you will need to come up with from other sources.
• How to bridge the gap between “free” monies and costs: Make sure you understand that, although student loans are included in the financial aid package, they will need to be repaid. This cost should be figured into your calculation. If there is still money outstanding, you may need to find additional money through 529 savings plans, private student loans from lenders such as Discover, or additional outside scholarships.
Try to estimate how much your child will be able to earn upon graduation so you can determine what will be involved in repaying student loans. The final choice also depends on intangible factors, but make sure you know what you’re getting yourself into financially before accepting any offer.