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The skinny on levelized-tuition plans
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Kantrowitz also notes that your tuition rate isn't the only thing affected by a levelized plan -- your financial aid package could be impacted as well.

"A levelized plan locks the tuition rates, but it doesn't tell you how much you're going to have to pay after financial aid is taken into account," Kantrowitz says. "If the tuition is locked in, but the financial aid is variable, you could end up paying more each year."

When creating financial aid packages, Kantowitz says, colleges frequently set a benchmark to help determine when a student will need gift aid -- aid they won't have to pay back, such as scholarships and grants -- and when "self-help" aid will suffice. Self-help aid is money that students will have to pay back, including subsidized and unsubsidized loans and work-study packages.

For example, if a benchmark is set at $5,000, students who demonstrate that they need less than $5,000 worth of financial aid every year will receive packages solely consisting of loans and work-study funding, while students who demonstrate that they need more than $5,000 will receive grants and/or scholarships in addition to self-help aid. When a levelized-tuition plan is in effect, even though the tuition rate may stay constant, schools still have the ability to raise or lower the self-help aid benchmark each year. If your school is using the self-help aid benchmark to compensate for budgetary changes, you could wind up with a significant change in your financial aid package from year to year and potentially pay more out-of-pocket expenses for your education.

The key to making sure you truly do pay one rate for all four years, Kantrowitz says, is to ask your financial aid officer about their financial aid packaging philosophy, how they determine your aid award, whether they use a self-help benchmark, and if they do, what that benchmark has been for the past four years. If the benchmark has risen at a slower rate than tuition has for incoming classes over the past few years, that's a good indicator that the school is trying to keep financial aid constant and provide students who show demonstrated need with the same level of funding each year.

Whether or not you're receiving financial aid, all students should also become well-versed in the rules and conditions of the tuition guarantee program, noting what happens when you've got to put your studies on hold for a semester or two, you change majors or take longer than the typical four years to complete your degree.

Be absolutely certain that this is the school for you before you enroll and that you're willing and able to finish out your degree. Students who spend one or two years in a school with a tuition-guarantee program, and then transfer or drop out, wind up paying higher inflation rates for the first few years of school, but leave before the inflation rate averages out.

Getting informed, asking the right questions and knowing exactly what you're jumping into before you sign on the dotted line will help ensure that your tuition-guarantee program is right for you.

Bankrate.com's corrections policy -- Posted: July 28, 2006
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