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 Year
after year we hear the same thing: College costs are skyrocketing
at a pace that far exceeds inflation. For the 2004-2005 school year,
tuition and fees at four-year public universities soared 11 percent
to $5,132. At private universities, they rose 6 percent to $20,082,
according to the College Board.
Of course, tuition and fees represent only a portion
of college expenses. Room and board, books and transportation costs
add to the bill. All told, the costs amount to more than $10,000
for one year at a public institution, and more than $25,000 at a
private one.
Underpinning this upward trend in costs is the
diminishing support that public institutions receive from state
governments. (Private schools as a rule don't get direct state support,
which is why their tuition costs run so much higher.)
For example, in 1980, state funds
accounted for half of the revenues received by public universities.
Over the next two decades, this amount gradually receded so that
by 2000, state appropriations accounted for slightly more than one-third
of college revenues.
Guess what made up a large part of the difference?
You got it -- soaring tuition costs ostensibly paid by mom and pop
or the college student.
But wait, there's less
Actually, the costs cited above are the "published" numbers.
The actual amounts paid are substantially less.
The majority of full-time undergraduate students (about
60 percent) receive grants -- that's free money -- from federal
and state governments, from the colleges they attend, or some combination
of the three. And many more students or their parents reap benefits
at tax time, when they are able to claim favorable education tax
credits or tuition and fee deductions. These all reduce education
expenses.
When the tax breaks and grant aid are accounted for,
the tally for tuition and fees in the current school year averages
$1,800 for students at public universities, $10,700 for those at
private universities, according to estimates by the College Board.
This represents a 65-percent-off fire sale for students attending
public universities and nearly 47 percent off for those going to
private schools.
Working the system
You might think that free money is awarded to those most in need,
but it's actually doled out to those who know best how to work the
system.
Parents of college-age kids have heard, no doubt,
of Free Application for Federal Student Aid. It's a long and complicated
form that asks nosey questions about your finances and is used to
determine your financial aid eligibility, based on your income and
assets. And you'd be surprised about who's eligible.
This year marks the first that the federal agency
is not mailing out renewal FAFSA forms; it wants everyone to apply
for free aid online at www.fafsa.ed.gov.
While there are lots of other sources of scholarship
money, the FAFSA leads to the big bucks. It should be filled out
and sent as soon after January 1 as possible, since financial aid
is distributed on a first-come, first-served basis. But it draws
heavily on information from your tax return that you send to the
IRS with a later deadline of April 15. So the sooner you can get
your taxes to your accountant, the faster you'll have access to
the information you need to fill out the FAFSA.
But before you run off to the accountant with your
W-2 forms and your huge list of tax deductions to be itemized on
the long form 1040, consider filing the 1040A or 1040EZ forms. This
advice comes from Kalman Chany and Geoff Martz, authors of "Paying
for College Without Going Broke," part of the Princeton Review
line of books.
"By filing one of the short forms and meeting
certain other requirements, you may be able to have all of your
assets excluded from the federal financial aid formulas, which could
qualify you for increased federal aid," they write. This strategy
works if your adjusted gross income falls below $50,000, they explain.
To avoid losing the attention of well-heeled readers,
the authors illustrate further: If, for example, someone has lots
of assets -- millions of dollars -- and draws interest income of
one dollar less than $50,000, they could file the short form. Their
assets would not be used to calculate their "expected family
contribution," enhancing their chances for getting a grant.
Free money for the rich
Some might find such advice to the wealthy, who could easily afford
to pay college bills, offensive. But the authors do a great job
of explaining in simple, easy-to-understand, terms how to best work
the system using lots of different strategies. And this information
is useful to those who are rich, poor or somewhere in between.
But the poor, it seems, are getting the raw end of
the collegiate deal. As a percentage of income, they are paying
most heavily to send their children to school. For those on the
low end of the income spectrum (earning an average salary of $18,800
in 1999-2000), the costs of sending junior to a public four-year
university averaged 42 percent of their incomes after taking financial
aid into account, according to the National Center for Education
Statistics.
Meanwhile, those earning an average of $62,500 were
charged the equivalent of 17 percent of their annual incomes. The
tab for the highest earners (average income: $124,600) amounted
to 10 percent of their incomes.
If you do the math, the wealthier households are paying
more out of pocket for college costs. But because of their own personal
abundance, they're feeling much less pain than low-wage earners.
Still, a college education is a worthwhile investment
no matter how you look at it, because it is the best way to break
out of the poverty cycle and join the ranks of the affluent, or
just remain in the latter's comfy circle.
It may come as no surprise that year-round workers
with college degrees earn more than those with high school diplomas.
According to the U.S. Census Bureau, it breaks down this way: In
2003, workers with a high school education earned $30,800; those
with four-year college degrees earned $49,900. That's a 62 percent
difference in pay for one year.
Over a lifetime, the disparity in earnings amounts
to more than a million dollars.
Do you have any advice for those seeking
financial aid? Do you have a success story about how you sent your
kid(s) to college? What strategies did you find most useful? Please
send your story to Boomer
Bucks to be considered for inclusion in a future column.
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