Fortunately, personal savings
alone are not always the only option for covering college costs. Financial
aid, in the form of student loans, scholarships, work-study programs
and grants, are an option for many families. However, most financial
aid is need-based - awarded according to a scale that takes into consideration
family income, assets, and the number of family members in school
currently or in the near future. Some of the most common forms of
financial aid are as follows:
- Scholarships & grants, although
not restricted by family income, are generally awarded for very
specific things, like athletic or academic merit. Many scholarships
are also awarded to students from a specific geographic area,
or whose parent(s) are employees of a particular company. There
are several books that detail scholarships available nationally;
you may want to consult one of them to explore your child's scholarship
options thoroughly.
- Student loans are more widely
available, but do increase the overall cost of attending college
because of the interest they charge. But, even though student
loans do force students to graduate into immediate debt, most
do allow for some flexibility in repayment.
- Work-study programs, as
their name implies, allow students to do campus work in order
to pay for some college costs. Depending on the kind of academic
workload a student has, work-study programs can leave them with
a very full schedule - but they could graduate debt-free.
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HOW
MUCH WILL FINANCIAL AID COVER TODAY?
|
|
Estimated Percentage of Average Public and Private College
Cost Paid for by Financial Aid
|
|
Total
Family
Assests
|
Annual
Family Pretax Income |
|
$30,000
|
$50,000
|
$70,000
|
$90,000
|
|
Public
|
Private |
Public |
Private |
Public |
Private |
Public |
Private |
|
|
$
20,000
|
88%
|
94%
|
65%
|
84%
|
7%
|
58%
|
0%
|
36%
|
|
|
40,000
|
87
|
94
|
64
|
84
|
6
|
57
|
0
|
36
|
|
|
60,000
|
82
|
92
|
55
|
80
|
0
|
52
|
0
|
29
|
|
|
80,000
|
77
|
90
|
46
|
76
|
0
|
48
|
0
|
27
|
|
|
100,000
|
71
|
87
|
36
|
71
|
0
|
44
|
0
|
|
| The
percentages shown here are taken from Peterson's Guide to
Four-Year Colleges 2001, and were calculated using the College
Board's average, comprehensive public college cost of $11,338
and private college cost of $24,946 for 2000-2001. Calculations
are based on approximate expected parental contributions
toward 2000-2001 college expenses for a family of four with
no other family members in college. Total family assets
do not include home equity. |
State Tuition Assistance Programs:
State Tuition Assistance Programs Many states offer, or are
in the process of legislating, require some form of pre-paid
tuition plan or savings plan trust. These are special tax-advantaged
plans that make it easier for state residents to pay for a future
college education. They allow taxes on earnings to be deferred
until needed, at which time they are taxed at the child's income
tax rate rather than the parent's higher rate. (For more on
tax-advantaged education investing, click down to "Getting a
Much-Needed Tax Break.")
Pre-paid tuition plans offer the additional benefit of letting
you pay today's tuition rates for a future education.
Your state Treasury department will be able to give you the
latest information on tuition assistance programs in your home
state, including rules about transferring plan earnings to another
state, investment vehicles available within the plan, etc. As
with any issue that concerns your taxes, you should discuss
any plans of this nature with your tax advisor.
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