(about planning for their future)
In this series of articles I’ve asked students to reflect about their interests and natural inclinations while thinking about their choices for a life-long career. From there, we’ve taken a look at the different types of training available for a wide range of careers. We’ve also reviewed some of the resources available to help make their choice. In this article we’ll examine resources and processes available for helping make a financially sound decision.
Most students want to choose an education that not only allows them the opportunities to explore their talents and dreams, but also will leave them in a financially strong position after school ends. It doesn’t take much knowledge of current events to know that repaying student loans has become a major issue in this country. There are several contributing factors for this phenomenon. Not the least of which is the students unfamiliarity with debt and the all-consuming impact it can have on life. A proactive parent would be wise to introduce debt to their children early in life. Perhaps we’ll explore ways to do this in a later post. But for now, let’s take a moment to understand the financial aid process and how it can best be used.
First, no matter which type of training your considering, the process begins with an application for enrollment after the student has chosen, and ranked, their leading choices. Although frustrating, ranking the choices is a factor in the schools financial aid offering. So give it serious consideration. A great research tool is the U.S. Department of Education’s College Affordability and Transparency Center, available online at https://collegecost.ed.gov/. There is a guided process for investigating colleges and matching them to the students’ needs and resources. Remember too, that college applications are a game of deadlines, and they’re pretty strict with them. Some institutions ask the applicant to write an essay, or perform additional tasks as part of the process. Don’t wait until the last minute. And don’t be a victim of confusion. I recommend creating a 3 ring binder containing the necessary application processes, paperwork, and deadlines. Using an online calendar can help keep things on-track as well. This is also a good place to keep notes of correspondence with the institution. Keeping notes on names, contact information, and conversations will go a long way towards insuring your sincerity.
Once you’ve received a letter-of-acceptance, the financial aid dance can begin. Just about every school now requires the online completion of a Free Application for Federal Student Aid (FAFSA), whether or not you’re even applying for federal aid. Why? Because it gives the school all the information they’ll need to evaluate the students (and their family’s) financial resources. If you haven’t been through a financial aid process before, then this will be somewhat intimidating. The form digs deep into personal finances to evaluate the households ability to pay for school. It also asks questions about the students demographics and the household in which they live. The earliest this can be done is October 1st of the preceding year. For example: Students wishing to attend college anytime from July 1, 2020 to June 30, 2021 should file the 2020-2021 FAFSA between October 1st, 2019 and June 30th, 2021. The tax information used for this filing would be from their 2018 taxes and can be automatically imported from the IRS database using its Data Retrieval Tool (DRT). Some schools may require additional information to that in the FAFSA, or another online questionnaire. The most common of which is the College Scholarship Service Profile (CSSP); created and maintained by the College Board. This profile is used to deliver non-federal financial aid. So be sure to understand what is needed, and its deadlines.
Once the information is received and analyzed, the school will send a packet outlining their financial aid offering. Here’s another place where things can get confusing. Understand that the term ‘Financial Aid’ does not universally mean money that does not have to be repaid. Many institutions will list loans or work-study programs under ‘Financial Aid’ in their cost information. Be sure of what does, and what doesn’t need to be repaid. Earlier, I referred to the financial aid process as a dance. And here is the next step in that dance: Don’t assume that what is sent in their initial packet is the best and final offering. Students may increase the financial aid package upon appeal or discussion with their financial aid office. If you have concerns, just give them a call. In my experience, people working at schools really believe in their mission. If they know a prospective student is very interested, they will do their best to work with them. Along those lines, here’s another must: Show up and talk to everyone you can. If they’re having an open house, show up. If they’re hosting an event, show up. If invited to anything, show up and talk, talk, talk. Let them know that they’re making a sound investment with their money and time. This may sound simple, but it often works. With one of my children, every time we showed up, the school sweetened the pot. Along those lines, there are many private scholarship offerings available each year; in just about every discipline of study. Private companies such as FastWeb can help find these additional resources. And every dollar helps.
Now let’s talk about how to make a financially strong decision. First, don’t make the assumption that state schools are always more affordable that private institutions. It really does depend on the financial package that each school sends. With that said, don’t choose a more expensive school just because there are student loans available. Only do that if the degree from the more expensive school will get you substantially more pay than the same degree from the less expensive school. How do you know that? These number are out there. If you can’t find them on the internet, just as the placement office at the school what pay can be expected with the degree. Let’s put it this way. When graduating with just $40,000 of 9.5% interest student loan debt, it will take over 13 years of paying $440 each month to pay-off the loan. That makes the starter household budget really tight. Any serious evaluation of school costs must consider the long-term financial impact of the choice. And here’s where it gets real. Roughly, an investment with a 7% rate of return doubles every 10 years. Whatever your retirement goal, whether it’s $1, 2, or $10M, the math is the same…….by waiting 10 years to start your retirement savings, you’ll now have to more than double your monthly installment to meet your goal. And it won’t be any easier then. If you’ve chosen to join an apprenticeship program in which you get paid from the start of your education, you should start a savings program from the start.
For the Student, don’t just assume that ‘once you’ve graduated’, your education will provide you with the lifestyle you envision. Do your homework. Understand your choices. Plan your steps for the life you want.
As always, thanks for reading.
And remember to take the next step…
Here are some additional Career Education Resources
http://www.everygoodpath.net/economics101_collegevsapprenticeship/ Excellent article comparing College with Apprenticeship
https://nces.ed.gov/collegenavigator/ The National Center for Education Statistics College Navigator tool for investigating colleges: Grad rate, Avg cost, Avg % who get financial aid, Avg amt of financial aid
https://collegecost.ed.gov/ U.S. Department of Education College Affordability and Transparency Center
https://fafsa.ed.gov/FAFSA/app/f4cForm FAFSA estimator tool
https://www.fastweb.com/ Private financial aid resource company