If you have a high school student considering college, congratulations! It’s an exciting time in their life and yours. But, it can be overwhelming as well. While you and your student may be focused on getting into the college of their dreams, it’s important to consider how you’ll pay for it all.
Every college is required to provide a ‘net price calculator’ on their website, which gives you an estimate of what your first-year student can expect to pay based on your income and other factors. While not exact, these can be valuable planning tools.
Income-Share Agreements (ISA)
The information you provide qualifies your student for need-based funding and determines eligibility for federal grants and loans. Once your student submits the FAFSA, you’ll get a report that details your expected family contribution (EFC), which is used by each school to calculate the amount of aid your student is eligible to receive. Don’t make assumptions about whether your student will or won’t qualify for aid. It’s complicated, so we encourage everyone, regardless of circumstances, to file the FAFSA every year.
Colleges offer financial aid in many forms. For example, your student may qualify for a scholarship if they attend your alma mater, or there may be grants available for students pursuing certain majors. Many of these options require forms in addition to the FAFSA in order to apply, so help your student manage the details and deadlines of this process.
Since there are no payback requirements, your student should apply first for grants and scholarships. If you need to apply for loans, students should apply for federal loans first because they usually have lower interest rates and better payback terms. Student loans from private sources are another option, although most require a co-signer. When evaluating parent loans (loans you as the parent take out to pay for your student’s college), your best options are less clear. For example, federal parent PLUS loans may have higher interest rates and fees than loans to students, and private parent student loans (such as an Alaska USA line of credit) may have better terms than the PLUS program or other parent loan options. Set aside time to do some serious homework here.
You may be shocked when you see what the FAFSA says your expected family contribution (EFC) should be. But don’t get discouraged—this is not what you are required to pay to send your student to college, it’s just a number that colleges use to calculate your financial need. Your family’s EFC is based on many factors including income, family size and number of family members currently attending college.
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