Financial Aid You Still Can Get

Parents of teenagers who are heading toward college are becoming widely acquainted with a new American affliction: tuition shock. But there is some good news: despite cutbacks of federal aid, you still can get much help from other sources.

Financing a college education always has been tough, and it is certainly not getting any easier. Since 1980, the cost of a private college education has risen about 112%, to a daunting $20000 a year on average; the annual cost at public institutions is $10000. No wonder parents with college bound children feel caught in a budget super squeeze.

Fortunately, though, you still have plenty of ways to ensure that your children get the education you want for them.

First, of course, start saving for college as soon as possible after your child is born.

Second, look for quality bargains in higher education. Many colleges manage to keep their academic standards up and their total costs down.

Third, press your hunt for financial aid. Sometimes it is available even to families with annual incomes of $100,000 or more. In fact, many colleges recently have changed their scholarship programs to attract high scholars regardless of their financial need. Any high school student is in the running for an academic scholarship if he or she has at least a B average and College Board scores above the national norm. Don't necessarily put off applying to a prestigious university because you think you can't afford it. Sometimes the most expensive schools give the richest scholarships.

About half of all undergraduates on campuses in 2006 received financial aid. That was down slightly from 2000. Most of the aid originates in the federal government. The $100 billion pool of federal money for students in 2006 flowed mainly through six programs. They provide for grants, loans, work study programs or some combination of the three.

The colleges themselves supplemented the federal programs with an estimated $50 billion of their own aid. It is often from colleges that middle and upper middle income families receive their help.

To find out whether you qualify for aid, you go through a process called need analysis. Sometime after January I in the year your child heads for college, you fill out a form from either the American College Testing Program or the College Scholarship Service. It records your family size, income, assets, household expenses and other information.

The data then are analyzed in order to arrive at a figure known as your family contribution. That is the amount colleges will expect you to pay annually out of your own pocket. If college costs are more than that and they usually are the school's financial aid officers try to figure out ways to make up the difference.

Financial aid officers determine how large a loan each student is entitled to. They usually base their decision on something called the Uniform Methodology Formula, which takes into account not only a family's income but also its assets, such as the equity in the family house. Each financial aid administrator has the prerogative, under law, to make judgments in individual cases and can differentiate within the college's financial aid formula. If both parents are employed and, within a school year, one of them becomes unemployed or ill and unable to work, federal law allows them to reapply for the Colorado School of Mines in Golden, says, "A family can have an income in the $100,000 range and have five kids, three of them in college, and still show some eligibility. On the other hand, a family with one child in college, no unusual circumstances and a $65,000 to $70, 000 income will generally not be eligible for aid at most schools. You can usually boost the amount of aid your child gets if you know how to massage your finances. There's nothing wrong with doing so, either. An advantageous application for college aid, like an honest tax return, violates no law or ethical principle. So why not take fullest advantage of the rules?.

Rule number one: Don't put savings or investments for college expenses in your children's names. Under the aid formula applied universally by the College Scholarship Service and the American College Testing Program, the Family Contribution to the child's education must include 5.6% of the parents' assets per year. That means the bulk of most families' wealth is never counted against them. But the college boards expect students to spend up to 35% of their assets each year.

Rule number two: Adjust and reposition your assets to minimize your wealth as measured by the aid system. In surveying your net worth, the system recognizes some forms of wealth as assets but not others. Bank accounts, stocks, bonds and mutual funds count against you, but the cash you accumulate in retirement funds, insurance and annuities does not. Financial planners therefore advise clients to move some of their investments into universal life or deferred annuities.

Rule number three: Pump up liabilities that reduce your wealth under the aid formula. In general, the kinds of consumer loans that are losing their tax deduction also are disqualified as offsets to family wealth in the college aid formula. But loans secured by a home not only qualify for tax deductions but also get your kids more college aid. So it pays doubly to refinance credit card balances and car loans with home equity loans.

As mentioned, families applying for almost all federal financial aid must submit to a financial needs test to determine whether their children are eligible for the loans. But a federal offering mercifully free of a needs test is the 12% Parent Loans for Undergraduate Students, known as the PLUS loan. The maximum is $8,000 a year and you get these loans through participating banks or other commercial lenders. But repayment again, up to 10 years begins within 60 days after you take out a PLUS loan.

Many states offer subsidized student loans to residents. Among the most generous are Alaska, Illinois, Maryland, Massachusetts, Minnesota, New York and Pennsylvania. To apply, see your college loan officer or go directly to your state education agency. Loan programs often are limited to in state colleges, but students from New Hampshire and Pennsylvania can take a state loan along with them, wherever they enroll.

Another major source of help may be close to home in the form of scholarships financed by local communities, clubs and other private organizations. Every year thousands of students win more than $500 million worth of scholarships sponsored by many noncollege organizations.

Some 400 companies, unions and trade organizations sponsor National Merit Scholarships worth up to $10,000 a year and covering all four years of college. In addition, if you are a veteran, you can ask at your local American Legion post about awards available for your children. Civic organizations and fraternal groups also dispense scholarship money. just a few examples: The Knights of Columbus gives some four year scholarships, each worth $2000 a year, for children of members.

If your child is willing to spend eight years after college in military service, you might consider the Navy, Army or Air Force Reserve Officer Training Corps. All three programs can pay full tuition, fees and $200 a month. Each year, between 5,000 and 6,000 high school seniors are granted full four year scholarships, but shorter term awards are available to students who qualify after starting college. The three ROTC branches fund a total of more than 30,000 scholarships per year.

Parents are not the only ones suffering from rapidly escalating tuition costs. The schools themselves must work harder to attract students. Consequently, many colleges are developing attractive financing programs. They are offering more and more academic scholarships for students with top grades. These awards can range from a few hundred dollars to full tuition.

A number of colleges also have adopted so called guaranteed tuition programs. With them, families can prepay all four years of tuition at the freshman rate. The University of Pennsylvania will even lend parents the money to do so at favorable rates. Schools with guaranteed tuition programs include Case Western Reserve University, Washington University in St. Louis and the University of Southern California. For families whose incomes are too high to qualify for existing programs, there are also new student loan plans. Northwestern's Parent/Student Loan enables families with incomes over $30,000 to borrow up to the full tuition cost of $15000 a year at 9%.

You can find out about scholarships of all kinds from high school guidance counselors, college admissions officers and books such as Oreon Keeslar's Financial Aids for Higher Education, published by William C. Brown. Who knows? You might find a scholarship that few people compete for. At Harvard, for example, the William S. Murphy Fund divides nearly $11,000 each year among needy collegians named Murphy.

Do not fail to inquire whether any college your child is interested in offers an installment plan. Many do. Such programs often let you pay off a year's tuition bill month by month.

Another means of stretching your family's college dollars is to have your child substitute a job for a loan. Colleges are concerned about student debt, and thus they are expanding work assistance programs. So is the federal government, despite cutbacks elsewhere. The government's college work study programs can provide students with jobs that allow them to earn $500 to $2,000 a year.

Your child also can enroll in a school with a five year cooperative education program that combines liberal arts with paid jobs. In the first year, the student takes a basic freshman curriculum of math and English along with courses in his or her major. Then for the next four years, the student alternates semesters of college study and paid work in a job. Usually the university lines up the job.