Finding the money to send your teen to college
By Lucy Lazarony • Bankrate.com

March 8, 2000 -- After filling out forms, writing essays and enduring the long wait for that much-sought-after admissions letter, it's finally happened. Your child has made it into college. Go ahead and celebrate, enjoy the moment -- you've earned it.

Now comes the really hard part -- paying the bill. Even as you and your teen were doing a victory dance around the acceptance letter, another piece of mail from the university was headed your way -- the all-important financial aid award letter.

Many American families will need help swinging that college tuition bill. A financial aid award is a crucial element.

In a financial aid package, a college or university will try to make up the difference between the cost of attending the school and a family's expected contribution as determined by the federal government. A family's expected contribution is calculated from information submitted on a Free Application for Federal Student Aid. Experts urge families to file FAFSA forms in early January.

A financial aid award determines just how much your family is going to pay for the privilege of sending your son or daughter to a specific college or university.

Aid packages vary. Much depends on a student's academic record, a family's financial need and how much aid is available from a school. Private schools tend to have deeper pockets than state schools. They also tend to cost more.

Good news -- and not-so-good news
Some schools send out acceptance and aid notifications on the same day. So that euphoria over your pride and joy getting into his or her dream school may be short-lived as your family delves into the number-crunching part.

The first thing to consider is how much of the financial aid award is for grants and scholarships and how much is for loans. Check out all the details.

Is the grant renewable? Is the scholarship contingent on maintaining a certain grade point average? Does a separate application need to be filled out for the loan?

Another key thing to scrutinize is the cost-of-attendance estimate listed by the college or university. Does this figure cover all student expenses for a full nine months? Some schools include indirect college costs such as transportation and living expenses in a cost-of-attendance estimate. Others don't. Some schools stick to tuition, books, and room and board.

"If they are confused about anything, they shouldn't hesitate to call or e-mail," says Benny Walker, vice president for enrollment at Furman University in Greenville, S.C.

Online advice for the maze
Several Web sites, including Peterson's and FinAid, offer tips for maneuvering through the financial aid process. Detailed information on loans and a calculator for comparing award letters are available on the Nellie Mae site. The College Board site boasts numerous calculators, worksheets and online brochures.

Be sure to check a university's Web site as well. You may find the answer you're looking for in the financial aid section.

A simple question may be answered with a quick phone call to the school, but not always. At larger schools you may have a tough time getting through. Be as specific as possible in any voice mail messages. And be patient. Phone tag is common.

Requests to modify a financial aid award because of a change in a family's financial situation or a student's academic standing should be put in writing. Most schools respond to these requests fairly quickly.

"When appeals come in, we usually turn them around in 48 hours," says Furman University's Walker.

All decisions are final
Also realize that you don't have to accept all aspects of a financial aid package. For example, your teen may want to decline a loan in favor of joining a work-study program. But be prepared to stick with this decision. That loan money will likely go to another student and you won't be able to get it back.

Be sure to report all outside scholarships to your school's financial aid department. Your financial aid award may need to be adjusted. Schools take this stuff seriously. If they find out about an outside scholarship later in the semester, they won't hesitate to yank something else, such as a grant, out of your aid package.

The sooner you and your teen get a jump on all this financial aid stuff, the better off you'll be. Most schools give applicants until May 1 to select a school and accept a financial aid package. Some state universities have April 1 deadlines.

"Too often the student will grab the award letter and see a scholarship or grant and figures it looks good," says Jack Joyce, manager for communications and training services at the College Board. "The letter will then find its way to a drawer and stay there."

Not a good move if you want to land all the financial aid you're entitled to. And don't make the mistake of assuming that accepting admission into a university will somehow secure your financial aid package.

"You've got to handle the two separately and with equal importance, and meet both deadlines," says William Stanford, financial aid director at Lehigh University in Bethlehem, Pa.

"Don't assume the two are attached at the hip. You've got to accept both."

Stay on top of things. Make a list of all key deadlines. Keep a file with copies of all completed forms.

How to pay the family share
Once you understand the details of your college aid package, the next step is figuring out how to pay your family's share of the bill. There are three basic options: delve into savings, set up a monthly payment plan or borrow.

Experts advise families to have a plan in place before they accept a college financial aid award.

Colleges charge a nonrefundable deposit ranging from $200 to $600 to hold a spot for an incoming freshman. If something happens and your family can't afford that dream college after all, you'll be out a couple hundred dollars and in for a whole bunch of last-minute stress.

"In June, if they don't get the answer they want, they forfeit their deposit and they have to scurry around to find another place," Stanford says.

Families who need to borrow should be sure to exhaust all federal loan options before turning to private lenders.

"The federal loans are definitely the best way to go," says Carolyn Shanley, senior writer and public relations manager for Nellie Mae. "They have lower interest rates and they have more flexible repayment policies."

Students may be eligible for subsidized or unsubsidized Stafford Loans. A subsidized Stafford loan is based on need and the federal government pays the interest on the loan while the student is in school. With unsubsidized loans, the borrower is responsible for the interest from the date the loan is disbursed.

Subsidized Stafford loans are basic components of many financial aid packages. Students may take out unsubsidized Stafford loans to help pay for their family's share of their college expenses.

Turning to the feds for a loan
Federal loans also are available to parents. Parents may borrow up to the full cost of a student's education minus any financial aid with a Parent Loan for Undergraduate Students (PLUS) loan. These loans are government-sponsored and have a variable interest rate that is capped at 9 percent. Families must pass a credit check to qualify for a PLUS loan. Monthly payments begin within 60 days of the loan disbursement.

"If parents just want to finance it out and out, that's the way to go," says Shawn Lindstrom, director of financial aid and scholarship services at eStudentLoan.com, of the PLUS loan.

When choosing a private lender, the most important things to look for are cost and customer service. Seek out the advice of the university's financial aid department. Most schools have a list of preferred lenders.

"Your best bet is to work through the financial aid office because they'll have an established relationship with a lender," Shanley says.

When in doubt, ask questions
EStudentLoan.com allows parents and students to compare loan programs from a variety of different lenders.

"You get an apples and apples comparison," says Lindstrom, who also worked as assistant director of financial aid at Ithaca College in Ithaca, N.Y.

"If you're a student and you're looking at all these brochures, it's almost impossible to decide what's the better deal," Lindstrom says. "Plus, there's origination fees. It's mind-boggling."

The whole financial aid process can get a bit overwhelming. It's natural to have concerns and questions. Be sure to speak up. If you don't ask, your family could lose out on aid.

"If they have anything that would seem to be remotely involving a question about something in the award letter or financial aid process, be sure to ask," Joyce says. "It's very clearly a complex process.

"If this whole process makes sense to the family, they should be worried."

-- Posted: March 8, 2000