Financial Aid is Great- until it isn't.
It is a good day when I can share a true financial aid story. I have altered the details just enough to protect the dignity and privacy of the family who granted permission to use it so you would learn from it.
Our friend John lost his job at the end of 2020 due to the Covid-19 pandemic. He was in a high-paying sales position in the financial services industry. Though he is moving in a new, entrepreneurial direction, the timing is not good. Their son is starting college in less than a month.
When I learned this spring what was happening, I suggested they “amend” their FAFSA with the university where he was accepted. When things change for the worst financially, you can and you SHOULD do that. The FAFSA is a snapshot of your financial status. If that changes for the worse ANYTIME you have someone in college, the financial aid office should be alerted to see if your student may qualify for more grants, scholarships, or loans. The family updated their status, waited for weeks, but they were awarded MORE MONEY!
That’s the good news.
But, as Paul Harvey used to intone on the radio….here is the REST of the story. The not-so-good news is that there is still a real gap between the aid and the costs. Let me share it with you. When I use percentages, I am referring to the total cost. When you see a number it usually refers to a gap that must be funded.
Of the ESTIMATED cost to attend, the package of grants and loans added up to just under 82% of estimated costs. Honestly, that is one of the highest percentages I have ever seen! However, that leaves nearly a $5,000 per year dollar gap between the “financial package” and the estimated cost to attend this year.
IF you remove the Federal Direct Subsidized Loans and Federal Direct Unsubsidized Loans from the package, the grant/scholarship portion shrinks to 56% of the “guestimated” cost to attend. Believe it or not, that is almost 2/3’s higher than most students get in scholarships and grants these days. Still, it just isn’t enough.
If you have to borrow for the “gap” AND take the offered loans, this student and their parent(s) are looking at over $11,000 per year in borrowed funds. If their son attended and graduated in four years, this student could accrue almost $50,000 in college debt.
This student and his parents did something very smart, though. He worked hard to qualify for dual enrollment, one of the techniques I advocate in my book, ENOUGH, The College Cost Crisis, to reduce college costs. By taking and getting good grades in college-level courses in the last two years of high school, he has two years of undergraduate credits going in. IF he maintains the grades and makes full progress, he could graduate in as little as two years. That would reduce his projected loan costs to just under $25,000. If he takes a 10-year repayment package, his monthly repayment amount would be between $320-345 a month. If he can make those payments, he will be financially free in 2034.
Folks, let’s be clear- this is one of the largest awards packages I’ve seen. Even so, the “gap” plus the authorized loans adds up to 40% of the estimated costs to attend. And, we are considered a bargain price state.
While we’re at it, let’s get brutal about their “estimated costs” page. The personal expenses section is way off. Here’s why. This university lists personal expenses at $1,681 an academic year. There are roughly 16 weeks per semester or 32 weeks of school per academic year. That’s just over $51/week. Show me how a college student spends less than $50 a week on personal items. That doesn’t cover the occasional pizza, a new piece of clothing, or deodorant and toothpaste. Hence, the constant advice to parents that out-of-pocket expenses will usually be a lot more than you think.
As the saying goes, the devil is in the details. That’s exactly why I wrote my book, ENOUGH, THE COLLEGE COST CRISIS. For less than $20, I walk you through the basics AND options to knock down higher education costs. Forwarned is forearmed. Financial Aid has not been able to cover the costs of attending college for decades. Know that going in. Take the time to educate yourself now, so you can guide your student towards good decisions.
Next week- a realistic plan if your student is just entering high school. You’ll want to share with your friends and relatives!
Until next time,
All My Best,
Bonnie Burkett
