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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?
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|
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 Many states offer, or are in the process
of legislating, 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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