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It's Never Too Early
11/1/2012
Kristen Earle
Thursday November 01, 2012
by: Kristen Earle

Section: Inside Insight


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Paying for college is often one of the leading financial worries for students and their parents. This isn’t surprising given The College Board’s most recent “Trends in College Pricing” report, which found that college costs at in-state four-year public institutions rose by 8.3 percent for the 2011–12 academic year alone, with tuition averaging $8,244. Despite the escalating cost of college, there is good news for students, parents, educators and school counselors; both the federal government and private sector have developed tools aimed at increasing awareness and transparency around planning, preparing, saving and paying for college.

Brush Up on College Costs
One of the first steps school counselors can take to help increase awareness around college costs is to encourage parents to educate themselves about the true cost of college early on so they are not blindsided by tuition prices once their children reach college-going age. This should start as early as elementary school. By knowing what their expected financial commitment will be, parents will be able to plan accordingly for their child’s education.

Today’s colleges and universities have comprehensive websites enabling parents to obtain information on the application proc-ess, degrees and majors offered and attendance costs. Colleges will often list their “sticker price” on these websites and college fair materials. This can be confusing to parents as there are often differences between this price and the lower cost students and their parents actually pay. “Sticker” or “published” prices include tuition and fees as well as room and board costs. Although some do end up paying this price, parents should not be discouraged by these published prices as, for many, federal and state financial aid and in-stitutional and private grants and scholarships will offset a good part of this cost. The resulting net price is typically a much more palatable figure for parents to digest.

The federal government has recently taken steps to help students and parents determine the actual cost of college. As of Oct. 29, 2011, all colleges and universities participating in the federal financial aid programs are required to publish a college cost calcula-tor on their website using the institution’s own data to provide individualized estimates on net price. At a minimum, these cost calculators must include data on the student’s approximate expected family contribution. In another effort to help make college costs more transparent, beginning in July 2012, the U.S. Department of Education began publishing college cost and net price lists that rank colleges using several of the aforementioned factors. These rankings are updated annually and are available along with other tools on the agency’s College Affordability and Transparency Center website.

Plan for Post-secondary Success
Once parents know what they can expect to pay they can begin to chart their child’s path to college using the many federal and private tools available. Student loan guaranty agency sponsored sites available on Going2College.org allow students and their families to explore career options, plan for college and locate financial aid sources in their state. These comprehensive sites serve as one-stop resources for parents and students and include such tips as encouraging them to talk to school counselors about classes and activities their child should take in elementary school to prepare for high school and beyond.

It is never too early for school counselors to talk with parents about their child’s college and career goals. The U.S. Department of Labor has developed a My Next Move career search tool, which allows students to match their interests with careers. Through this tool, students can take a self-assessment on careers that interest them, including what people in these careers do on the job, types of skills and education required, average salary and statistics on future demand.

To help students and families identify schools and programs available in their state, the U.S. Department of Education’s College Navigator website features a tool allowing users to build a list of schools for side-by-side comparisons. Using these tools while in elementary school can help students select the right classes to take once in high school, choose colleges that offer programs related to their career interests and create excitement about higher education.

Start Saving Earlier
Paying for college can seem like a daunting task for most parents. As school counselors, you can encourage parents to start saving for their child’s education even while their children are still in elementary school. Prepaid tuition and college savings plans, com-monly referred to as “529 plans,” are a good choice for parents looking to get an early start on saving as they offer significant tax benefits. These plans, available by state, allow families to set money aside as a child moves through elementary and secondary schools, and when the students reach college-going age, make withdrawals for qualified education expenses without incurring fed-eral income tax on the earnings. In addition, many states will replicate the tax advantages offered at the federal level by offering tax-deferred growth and withdrawals for qualified college expenses.

According to the College Savings Plan Network, there are two types of 529 plans: prepaid tuition plans and savings plans. Pre-paid tuition plans, available in 11 states, allow parents to lock in and start paying toward tuition based on current rates. This op-tion helps to insulate families against the continued increase in higher education costs. Prepaid tuition plans typically involve either a contract plan enabling families to purchase a predetermined amount of future tuition expenses or a unit plan, which allows con-tribution to a specified amount of college units or credits at the current cost of tuition.

By contrast, savings plans differ as families make contributions to individual investment accounts, with yields based on market performance. There are generally more risks involved in these types of plans as families must make portfolio decisions like they would for other investments.

Encourage families with interest in 529 plans to shop around to find the best plan for them and their student, as most college savings plans are open to residents of every state.

Know the Options
Figuring out how to pay for college is one of the most difficult steps in the college-going process. Several options are available to help foot the bill for college, including federal student aid, state grants, federal and private loans, institutional aid and private scholarships. Before students and their parents even begin to think about applying for loans, they should fill out the Free Applica-tion for Federal Student Aid (FAFSA) to determine if and how much federal student aid the student may be eligible for. The U.S. Department of Education’s FAFSA4caster tool allows students to apply online for federal student aid rather than file a paper FAFSA.

Federal student aid is defined as money that helps students with their education expenses while in college. It is split into four categories: grants, loans, scholarships and work study. Grants consist of money that typically does not have to be repaid, as do scholarships funds, which are awarded upon academic achievement. Federal work study is a program where students can work during college and use the money to help pay tuition.

Higher education loans are also included under the umbrella of federal student aid and provide several low-interest-rate loan op-tions for students and parents. Loans for college are available directly through the U.S. Department of Education’s Federal Direct Loan Program and consist of both subsidized and unsubsidized loans. Subsidized Stafford loans are available to students who meet certain financial need criteria and carry slightly better terms than unsubsidized loans, where there is no requirement to show finan-cial need. Unsubsidized Stafford loans are generally available to all college students. Students can apply for these loans by filling out the FAFSA and usually receive this aid in a student’s college award letter. The maximum amount that can be borrowed at the fed-eral level for an undergraduate degree is $31,000 for dependent and $57,500 for independent students.

Federal loans continue to be a good choice for students as they contain programs to help with repayment after college. The Federal Perkins Loan Program is another federal loan option where one of approximately 1,700 participating post-secondary institutions can provide low-interest loans to needy students.

PLUS Loans are another type of federal financing that is available both to parents of dependent undergraduate students and to graduate students. These loans carry a fixed 7.9 percent interest rate and require applicants to meet certain credit requirements. The maximum loan amount for these loans is defined as the student’s cost of attendance (as stipulated by the school) minus any other financial aid received. The application process for these loans begins by filling out the FAFSA and continues with a school’s financial aid office.

Federal loan limits have remained relatively stagnant for the last few years despite the continued rise in college costs. Due to this, many students and parents experience unmet need, or the amount they still need to pay after federal loans and assistance are exhausted. Various private loan products are available to help fill this gap.

Importantly, you should encourage students and parents to look into the availability of institutional aid, offered directly through colleges and universities, as well as assistance provided through state grant agencies. Non-profit and private organiza-tions also provide money for college through scholarships. The U.S. Department of Education’s Federal Student Aid website is a good resource for school counselors, families and students in researching higher education funding options.

Training for School Counselors
Among the federal resources available to help school counselors understand the federal student aid process is the National Train-ing for Counselors and Mentors (NT4CM) program. This program provides free training, information, resources and tools regard-ing federal, state and local financial aid programs for school counselors and mentors working with students and their families. NT4CM training sessions are led by professional trainers who provide comprehensive information on topics such as federal and state student aid programs, scholarship searches and financial aid fraud. School counselors who attend learn how to access free resources such as fact sheets, brochures and PowerPoint presentations to help them help their students.

College costs should not serve as a deterrent to going to college. A college degree is always in demand and still pays dividends over a lifetime, opening doors to individual success. A recent report from the Economic Policy Institute found earnings for young workers with a college degree are nearly 80 percent higher than those without a college degree. Job prospects are better too, even during a recession. A 2012 study from the Georgetown Center on Education and the Workforce found that jobs requiring bache-lor’s degrees have increased by 2.2 million jobs since the recession began in 2008.

School counselors are some of the first advisors students and parents turn to when making choices about education. Guidance early on about the importance of planning, preparing and paying for college can help make your students’ college dreams a reality.

Kristen Earle is vice president of communications, National Council of Higher Education Resources. She can be reached at kearle@nchelp.org.