avoiding student loans

Only The Timid Have $50,000 In Student Loan Debt! Avoiding The High Price of the Higher-Ed Love Affair


What taking out student loans look a like after graduation

According to finaid.org, college undergraduates will likely graduate with an average of $24,651 worth of student loan debt or more. When you chuck in the loans parents take out on behalf of their kids that number jumps to $27,803; which is about the same as the down payment and closing costs of a $250,000 home. Why are we as a country ok with this fact? more after the jump…

Students and parents often wrongfully assume that if a student wasn’t offered any scholarships by their preferred school, no one else will offer them any either. So students will often resign themselves to a high debt load with the unrelenting finality of a death row inmate headed for the electric chair. They don’t fight back, they don’t protest, they don’t search for alternatives, they just give into to what they think is inevitability of their predicament…

To be honest, that sounds like the mindset of someone who is timid to me…

However, those who become savvy education consumers, know that finding the money to pay for college can be made easier by taking three simple steps: asking for more aid from schools, ensuring a correct FAFSA, and applying to additional internal and external financial aid.

The High Cost of The Higher-Ed Love Affair

When most students visit a college, they are taking in a lot of information. They learn everything from residential life to class size. As they take in the amenities, students often ignore the price. Anyone who has been on a college visit knows what its like when a student begins to fall in love with a campus. But like all love affairs it could cost a student big; just ask Tiger Woods, or the former Governor Mark Sanford of South Carolina.

Incoming undergraduates from high school are young. So naturally they have a tendency to fall in love easily. They look at their dream school and think their paramour is a “perfect fit” for them. They love it so much that parents and students are willing to put their future in hock for the chance to pay for the privilege of attending their dream school. But like many love affairs, this too will bring eventual heartache,

Without a shred of shame, parents & students line up each year to pay through the nose for the chance to attend their dream school. Students and their parents are so happy to have been admitted, that they forget about paying for it. Making matters worse, is the fact that most people will often chart a course of least resistance. Rather than work hard by searching and applying for scholarships, fighting for additional financial aid, or making sure they get their fair share of the federal aid pie most parents & students tend to take the easy way out and simply go into debt. Even worse, they pay full price for the privilege.

Seriously Think Before You Borrow!

Only Suckers Pay Full Price

Recently, NPR chronicled how fiercely competitive colleges work to attract the top candidates. They want the students who didn’t just get 4.0’s in high school or can dunk a ball. Rather, they want the type of students that they think have the potential to make an impact on the school, and society writ large.

To attract these candidates, schools utilize tuition scholarships as the main weapon in their arsenal. These “scholarships” are really a discount program that is paid for, either by the schools foundation, or by a simple direct discount off the price charged to the student.

Now one would ask, “how can schools afford to offer so many tuition scholarships?” The answer is simple; by charging full price to those suckers who can afford it, and are willing to pay full sticker price to go to their “dream” school. If you or your child is paying full price with no discounts or scholarships, the student is simply a revenue source.

If a school admits a student, but offers nothing additional to attract them, they don’t really want that student as much; but they do want the money the student brings in. This can be true not just of the so-called “rich kids”, but of students that have an Expected Family Contribution of $0 as well. Schools want the high level of financial aid the student receives from the government.

Closed Mouths Don’t Get Fed

Sound Off If You Want To Be Heard

There are schools up and down the educational spectrum, from Ivy League to trade colleges. In all likelihood, students apply to schools that they put in one of three categories: The reach, the likely, and the safety. The schools you are more likely to get into are ones that you are likely to either raise or maintain their average admissions student profile. In addition, those students are more likely to find themselves with better financial aid offers as well.  The key is for students and parents to be realistic in collegiate expectations.

Schools, just like companies, compete for customers. However, admissions counselors know they have limited slots available for incoming freshmen. Admissions officers know that only a certain percentage of applicants actually have strong interest in actually attending. Often, tuition discounts will be offered to those that have indicated the strongest interest in enrolling during interviews, visits, and in admissions essays.

For example, lets say a student was not accepted their dream school. However they were accepted to several, if not all of the schools that they applied to otherwise. If they felt they had a strong essay, along with strong test scores and grades, they may have simply been one of those that didn’t show strong interest. This is where showing increased interest might make a difference. It’s a good idea to begin by communicating with the college they are interested in and asking admissions about writing a letter to the committee about additional merit-based scholarships.

Admissions committees do not control need based aid, but they usually have the discretion to help with merit-based aid that is a part of the recruiting process. This is where writing a letter is great way to get admissions to reconsider their level in interest in their institution. If a student has been accepted to other schools that have offered them merit scholarships, they should let the committee know in the letter. Let them know as well that their school is the student’s first choice and priority. But one should preface that meeting financial need is critical to attendance. In the end it will be up to the committee to decide if they want a student enough to award additional aid. But it’s the first step in getting ones out of pocket costs to drop significantly.

Correct The Record

The Free Application for Federal Student Aid (FAFSA) is a long form, which requires multiple data items to complete. Mistakes happen. Whether a student or parent forgot a 1 here, or a checkmark there, errors happen. So it’s important for students to correct the record if something wasn’t accounted for by utilizing a Financial Aid Appeal. Financial aid officers have discretion in performing overrides to the system that calculate the Expect Family Contribution (EFC) of a student. People would be shocked what factors can make a difference, such as….

  • Recent divorce of parents
  • Divorce of a parent and a stepparent
  • A parent being laid off/discharged from work
  • A parent taking a severe pay cut
  • The bankruptcy of a business
  • Extremely high gambling debt of parents due to addiction
  • Drug addiction among parents that affects available income
  • The student is a runaway
  • Another family member in the household has or is going to attend college
  • A change in net value of a business due to slowdown
  • A loss of assets due to stock market changes….

I could go on, but the fact remains that so much goes into the formula, students and parents should never discount how life events can affect the final outcome. The same can be said of the College Scholarship Service Profile, or CSS Profile. The profile, required by some private schools and liberal arts colleges, is more detailed than the FAFSA. However the same factors apply, and can make a difference in the financial aid evaluation a school makes about a student.

Parents and students should remember however that an appeal is not a chance to bargain or highlight the student’s attributes. That just annoys financial aid counselors and does not help. The key is to detail for the financial aid appeals committee what factors have changed in the student and parent’s life that affect their finances that wasn’t accounted for. This could mean the difference between thousands less in student loans, and more grants to help pay for a students education.

Dig Deeper to Find the Well

Just because a student didn’t get all of the merit aid they needed doesn’t mean the school is tapped out. All not-for-profit colleges and universities typically have a foundation that is separate, but an integral part of the their operations. It is often through the foundation that extra financial aid is available via scholarships. Many of these are targeted towards particular majors, career fields, and financial needs. It is critical that students and parents mine through the college or university scholarship office for listings of aid programs and apply as soon as possible.

Students and parents should also not give up the hunt after their freshman year. In fact, they should become more relentless in their pursuit of additional aid. Often students are more qualified to win awards based on additional time in college. The hunt should never quit, until the student wears their mortarboard for the last time.

Time To Get To Work

It’s important that with any effort to secure money from others, there is a set of rules that govern best practices. Simply put, don’t look like a schmuck by doing the wrong thing and ticking people off. Also, don’t be content to sit back and take the path of least resistance. Get proactive and get costs down as soon as you can.

Don’t:

  • Fall in love with a school a student cant pay for. A good rule of thumb is, if the amount of loans one would have to take out exceeds the estimated first year salary in that career field, it’s a bad investment.
  • Complain or whine in an appeal letter or during an interview; rather, make a case for why the student is a good investment of school dollars in the form of a tuition scholarship.
  • Use a Financial Aid Appeal to try to bargain for need based financial aid or additional merit-aid; ignore rumors that say a student can “bargain” with the financial office of a school. They cant. It just ticks people off; financial aid can only review a case to determine if a factor exits that was not accounted for previously.
  • Try to either brag or highlight volunteer or grade accomplishments when appealing a financial aid letter. It has no practical effect.
  • Ever lie to the financial aid office; lying could result in the expulsion from a school, and loss of financial aid permanently.
  • Stop looking for scholarships until a student graduates

DO:

  • Keep reading this blog and others like it to become financially literate when it comes to higher ed financing
  • Show strong interest: be positive and show interest in colleges during tours, visits, interviews, or whenever speaking to admissions staff.
  • Remain positive during all interactions with college staff; people talk and negativity does not help students
  • Complete the FAFSA/CSS Profile as soon as a student or parents taxes are filed
  • Highlight a student’s interest in the school they are sending the appeal to.
  • Remember the difference between an admissions aid letter, and a financial aid appeal letter.
  • Address financial aid appeals and letters to admissions officers to an actual person, never the committee.
  • Be thorough when filling out the FAFSA or CSS Profile
  • Be ready to provide whatever information the financial aid committee asks for regardless of how personal or inconvenient.
  • Be realistic in what school is most affordable and appropriate for a student; it may not be the dream school, but better to go to a backup school debt free than pay through the nose
  • Use EFC Reduction strategies and ethical private financial advisors if needed to help make the process smoother and more effective if possible
  • Take work-study programs over student loans when given a choice.
  • Utilize cost saving measures such as CLEP tests, AP Classes, and community colleges to cut college costs.
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