Plan for College
Article written by Scott M. Kahan in Stroll Chappaqua - October 2024 Magazine
IT’S THAT TIME OF YEAR when parents start to panic, realizing they need to start planning to pay for college.
Funding a college education is a significant financial commitment for many students and their families. However, with careful planning and understanding of the available options, families can minimize their financial burden and make higher education more affordable. College funding typically involves a combination of federal and state aid, scholarships, grants, loans, and personal savings. Each source has its benefits and challenges, and navigating these options can be crucial to affording a college education without accumulating excessive debt.
FEDERAL FINANCIAL AID:
Completing the Free Application for Federal Student Aid (FAFSA) is the first step in securing college funding. The FAFSA determines a student’s eligibility for federal financial aid programs such as grants, loans, and work-study. Additionally, the FAFSA makes students eligible for Federal Direct Loans with lower interest rates and more flexible repayment plans than private loans. There are two types of federal loans:
subsidized loans, where the government pays the interest while the student is in school, and unsubsidized loans, where interest accrues from the time the loan is disbursed.
STATE AND INSTITUTIONAL AID:
Many states offer their own financial aid programs for residents attending in-state schools. These programs may include grants, scholarships, or state-funded work-study opportunities. Likewise, many colleges and universities offer institutional aid in the form of merit-based or need-based scholarships. Merit-based scholarships are awarded for academic, athletic, or artistic achievements, while need-based scholarships are based on the student’s financial situation. It’s important to research both state and institutional aid options early, as these programs often have specific application processes and deadlines.
SCHOLARSHIPS AND GRANTS:
In addition to federal and state aid, students can apply for private scholarships and grants from various sources. These funds are typically awarded based on merit, need, or specific criteria such as field of study, community involvement, or personal background. Unlike loans, scholarships and grants do not need to be repaid, making them a highly desirable form of funding. Numerous websites and databases are
available to help students search for scholarships that match their qualifications. Keep in mind, though, that you should never pay a fee to get this information. Applying for as many scholarships as possible increases the likelihood of receiving additional funding.
WORK-STUDY PROGRAMS:
The federal work-study program provides students with part-time jobs to help cover their education expenses. Work-study positions are typically on-campus or with approved off-campus employers, and the income earned can be used for tuition, books, or living expenses. Work-study not only helps students financially but also provides valuable work experience.
STUDENT LOANS:
If scholarships, grants, and work-study do not fully cover a student’s education costs, loans can help bridge the gap. Federal loans should be the first option due to their favorable terms. Private loans often have higher interest rates and less flexible repayment options, so it’s important to compare terms before borrowing carefully. Borrowing only what is necessary and understanding the repayment terms is critical to avoiding excessive debt after graduation.
529 PLANS:
Families often save for college through 529 plans, which offer tax advantages for educational expenses. Starting early and contributing consistently to a college savings account can significantly ease the financial pressure when it’s time to pay for college.
CONCLUSION:
Navigating college funding can be complex, but understanding the different sources of aid and how to apply for them is key to making education more affordable. Over the years, I have helped many Chappaqua families. Please reach out to see how FAM can help you.