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Money Matters

Maximizing financial aid amid tough times

1:47 PM PDT, October 30, 2011

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According to new research from Georgetown University, 63% of all U.S. jobs will require a post-secondary degree by 2018. The study estimates that college-educated workers can expect to earn $1 million more over their careers than high school graduates.

But college is an expensive proposition. Forty-two of the top 50 schools on the 2011 Forbes list of America’s Best Colleges cost more than $50,000 a year at current tuition rates. Tuition at public and private four-year colleges has risen an average of more than 5% per year during the last decade (adjusting for inflation), according to the College Board’s “Trends in College Pricing 2010.”

Meanwhile, the amount of scholarship and grant money available for students is getting thinner.

“Universities have reduced the amount of gift aid they offer their students or have been careful who they offer financial aid to,” said Sam Mikhail of Burbank-based College Planning Advisors, an organization that helps families figure out how to afford sending their children to college.

For most students, there is no single magic bullet when it comes to paying for college. Most families use a combination of methods to reach their child’s college costs, including federal and state funds, college financial aid and student loan programs, savings and monthly cash flow.

California has been especially hard hit by the education funding crunch. State budget issues compelled the University of California system to increase its tuition 18% this year and the university’s Board of Regents is expected to vote on a plan to raise tuition 8% to 16% a year through the 2015-16 school year.

“UC now receives nearly 60% less funding per student from the state than it did in 1990,” UC president Mark Yudof said in July in an open letter that attempted to explain the unprecedented increases. Yudof implored students to explore all of their financing options. “No one should feel they have to leave UC due to rising tuition and fees,” he added.

The UC system does have a strong financial aid program in place to help low- and middle-income families make a UC education financially feasible. For example, the system’s “Blue and Gold Opportunity Plan” ensures that all tuition and fees (including the recent increase) are covered with gift aid. California-resident undergraduates with family incomes up to $80,000 are eligible for this program.

Students can qualify for additional grants to help pay for books and living expenses. Additionally, for aid-eligible California-resident undergraduates with family incomes between $80,000 and $120,000, UC will cover the tuition increase for one year.

While financial need is certainly a primary consideration when it comes to awarding grants and scholarships, many colleges also dole out funds to students with exceptional academic or athletic prowess regardless of financial circumstances, as well as to applicants who fit a particular “box” they are trying to fill.

In a Dummies.com article, authors David Rosen and Caryn Mladen said that free money gets awarded to the students who are most attractive to people awarding the money. And “attractive” in this case doesn’t mean the ability to win a beauty contest. “The most attractive students,” they wrote, “are the ones who are most likely to reflect positively on the college or the giving institution by doing well in school and becoming successful, famous and wealthy — and, of course, giving back to the community.”

Paying heed to the current economic climate, some college aid officials are now allowed to award need-based aid to students with parents who have recently been laid off — even if it does not yet show up on their tax returns — and other unique circumstances, like a student’s family being burdened with high medical bills.

Many parents don’t realize they can further negotiate once they’ve received a merit aid package, especially at private schools with large endowments. Your child should apply strategically to schools to set the stage for aid negotiations later.

Beyond what is available directly through college financial aid offices, there is a dizzying array of scholarships available. But competition is fierce. The more a student fits the profile of a narrowly defined, local group, the greater the odds of being awarded financial assistance. “If you are targeting certain types of private scholarships, find something that is unique about you and research scholarships that award based on that,” Mikhail said.

Popular federal grants include Pell Grant (currently to a maximum of $5,550), Federal Supplemental Educational Opportunity Grant ($100 and $4,000 a year), Academic Competitiveness Grant ($750 for the first year of study and $1,300 for the second year), and the National SMART Grant (Science and Mathematics Access to Retain Talent Grant). The Pell Grant is the starting place for federal aid. If a student does not apply and qualify for a Pell, he or she is not eligible for the FSEOG, AC Grant or SMART grant.

The Free Application for Federal Student Aid (FAFSA) is the main application for most federal aid programs. It determines a family’s ability to pay for college based on the previous year’s tax information. From this, the U.S. Department of Education determines an Expected Family Contribution number that in turn determines eligibility for federal grants. The application and the family contribution number are forwarded to the schools when you apply.

But filling out the 100-plus questions on the application for federal student aid can be incredibly challenging or sometimes misleading. One classic FAFSA mistake is listing your primary residence (the home you own and live in) as an asset. Colleges are not supposed to figure home equity into the financial aid equation.

Joe Yogerst, Brand Publishing Writer