college

10 timely tips to pay for college in 2015

Graduation cap on $100 bills © zimmytws/Shutterstock.com

College costs and student loan debt are hot topics these days, but when you're the parent of a high school senior or a student preparing for a college degree, your concern is more personal.

Unfortunately, there are lots of ideas out there about reducing costs, but not much has changed yet, says Barmak Nassirian, director of federal policy analysis for the American Association of State Colleges and Universities in Washington, D.C.

Fortunately, there are advisers to offer tips for your educational expenses in 2015.

1. New benefits for veterans' dependents.

If you are a veteran or a spouse or dependent of a veteran, a recently signed federal law that goes into effect July 1, 2015, makes you eligible for in-state tuition everywhere in the country, Nassirian says.

"Some states, such as California, already offer in-state tuition benefits on an expanded scale to veterans, but this law not only opens up in-state tuition for virtually all public institutions, it also provides this benefit to veterans' dependents," Nassirian says.

Currently, rules about eligibility for in-state tuition for veterans vary by state. Some require residency to be established and some don't. This new legislation will eliminate those state requirements.

The benefit of paying in-state tuition can be extensive. According to the College Board, the average in-state tuition and fees in 2013-14 at public colleges was $8,893, compared with $22,203 for out-of-state tuition and fees.

2. Borrow responsibly.

Students who complete a FAFSA, or Free Application for Federal Student Aid, receive a "shopping sheet" from participating schools that informs them about costs of attending the school, as well as financial aid offers. Robert Mendenhall, president of Western Governors University, an online university that also provides student teaching and practical nursing training, says his university has reduced student loan borrowing by 39 percent in one year through their "Responsible Borrowing Initiative," which takes the shopping sheet a step further.

"Our shopping sheet lists a recommended amount to borrow that equals the direct costs of tuition and fees minus any grants and scholarships the student is receiving," Mendenhall says. "The impact in the past year is that the average amount borrowed dropped from $7,900 to $4,800. Students often get the shopping sheet from other schools that tells them how much they can borrow and they just accept it, but this makes it clear that you don't have to borrow every dollar you're offered."

Mendenhall says that FAFSA includes living expenses that WGU students often already pay, since many of their students are adults.

3. Always fill out FAFSA.

"FAFSA is your ticket to almost all financial aid resources, so fill it out, even if you don't think your family will qualify," says Ed Montesdeoca, a vice president for Capital One Bank. "FAFSA determines your student's or family's eligibility for federal grants and loans, but also resources from state government, college financial aid offices and many private scholarships. There are different qualifications for different financial aid resources, so just filling it out will open doors to numerous sources of aid and scholarships."

4. The biggest savings are at the front end.

Nassirian says that families often make the mistake of paying attention to the financial aid packages they receive rather than deciding from the beginning which schools their students can afford.

"Parents and students should spend as much time on the financial side of looking at colleges as they do on the academic and social aspects of a school," Nassirian says. "The real savings on a college education comes at the front end, in deciding where the student will go, based on net costs."

Dan Yu, managing principal of EisnerAmper Wealth Advisors in New York City, says students should apply to a variety of schools, including some that are easily affordable, some that are a stretch and one that's a dream school financially, to see what kind of aid is offered.

"Parents should say to their kids, 'If this is the school you want, then you'll need to contribute $10,000 of your own money to the cost,'" says Yu.

Marcy Keckler, vice president of financial advice strategies at Ameriprise Financial, says that parents should use the calculator at FAFSA.ed.gov to estimate the true cost of attending a particular school rather than focusing solely on tuition.

5. Look into "free" community college.

There's been some talk about extending K-through-12 public education through the first two years of community college in some states, with Tennessee leading the effort, Nassirian says.

"To my mind, it's not exactly free because that's usually based on the tuition being covered by federal financial aid, some of which you have to pay back," Nassirian says. "Once you include books, commuting or room-and-board costs plus loans you have to repay, it's not really free, but it's still a less expensive way to start college."

Starting school at a community college and then transferring to a four-year university can save thousands in tuition, even if the community college isn't free.

6. Savings and 529 plans.

While Montesdeoca says it's never too late to start saving for college, parents who start a college fund when their children are infants are in a better position to pay for school.

Yu says that grandparents also can set up a 529 college savings plan for their grandchildren and can even shift the money from one grandchild to another without a tax penalty, if one child receives more scholarships or attends a less costly school.

"Watch out for fees on these 529s and look carefully at the plans in different states because their flexibility and cost structure varies," Yu says. "You can open a 529 in any state regardless of where you live or where your child plans to attend college."

7. Apply for merit-based aid and scholarships.

Merit-based scholarships and grants are uneven, with some states entirely basing aid on financial need and others, like Georgia, focusing entirely on merit-based aid, Nassirian says.

Yu says if you have the grades to support an application for merit-based aid, you always apply because it costs nothing but the time to write a short essay.

But Nassirian warns that students should carefully examine the size of a merit-based award to see if it offsets the price of a private institution. In some cases, it's better to switch to a less expensive school if the merit-based aid isn't large enough.

Montesdeoca suggests applying for as many scholarships as possible, because even those that are small can add up to cover books or travel costs.

"Websites like Scholarships.com can help your student find scholarships for anything you can think of," Montesdeoca says. "Private organizations, foundations, charities and companies often have lesser-known scholarship funds with a much smaller application pool. Unique backgrounds, obscure hobbies or strange talents can set you apart on distinctions other than your merit or need."

8. Look into alternative ways to earn credits.

Competency-based education at schools such as WGU, which offers online classes, measures a student's learning rather than the time spent in classes, WGU's Mendenhall says.

"Our students pay $6,000 for a 12-month year of education that's the equivalent of three semesters," he says. "Technology can make school affordable yet still offer high-quality education through individualized study and small groups as well as online instruction."

Nassirian says that competency-based programs allow you to accumulate credits through assessments rather than class time, but he recommends avoiding for-profit, online-only schools because "they spend more money on advertising than on education," he says.

He says students who want to accumulate credits online or at a community college should make sure that the college or university they plan to attend later will accept them.

9: Earmark activity expenses for college.

"It's important to remember that you likely won't need to cover the costs of your student's college education completely from your savings and investments," Ameriprise Financial's Keckler says. "After they leave their bedroom for the dorm, your day-to-day budget will look different. If your child's been participating in somewhat expensive high school activities like a traveling soccer team or private music lessons, you may be able to reallocate those funds to college-associated costs like textbooks or Greek dues."

10. Compare loans.

Montesdeoca says that while you want to avoid taking on too much debt, many students need to take out at least small loans.

"Studies show you will probably make more money with a college degree than without one, so loans can be an investment in your future," he says. "There are all kinds of loans. Some are expensive and some are comparatively cheap. When looking at a possible loan, ask about two things: the interest rate and the repayment terms. Government-backed loans generally have lower interest rates and allow you to reduce your payments or stop paying for a little while, if necessary."

Nassirian says that credit guidelines for federal parent loans, known as Plus loans, were tightened a few years ago but are now loosened again so that parents can borrow the full cost of college minus any financial aid.

"There's never been any 'ability-to-repay' component to qualifying for these loans, just a credit check," Nassirian says. "Whether or not parents should borrow significantly to put their kids through college is questionable, but these loans are more available for parents who need them."

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