There is so much excitement when your teenager finds a college that they love and is a great fit for them. The next step is to channel that excited energy into creating a framework for paying for college, so their dream can be affordable too! In this blog, I asked Financial Planning Expert Raymond Van Buskirk about the framework he uses with Bright Futures Families for paying for college. I’ll also outline 5 straightforward steps to apply for college scholarships.
Framework For Paying For College
All families hope that their student will receive a full-ride to their dream school for things like athletics or academics. This is especially true for families with multiple children! But for the majority of families, paying for college is more like a patchwork quilt. The costs are covered by sewing several sources of financial support together.
I sat down with Raymond Van Buskirk to find out what kinds of financial support are available for families in affording college.
Q: What is your framework for paying for college?
A: With our clients, we use a framework to pay for college – piecing together the following:
- Your family income and assets
- Money from relatives
- Local scholarships
- Institution based scholarships
- Need-based aid, loans, or grants
- Opportunities for work at the college
You could easily have a dozen or more pieces that come together to make it work.
So which of these financial resources should your family use to help fund your student’s bright future? Let’s dive into what they each entail and how financial advisors like Raymond find the best combination for your family.
Merit and Need-Based Financial Aid
Your student could qualify for financial aid to help cover college costs no matter what your income. There are two main categories of financial aid based on need or merit.
Q: What is merit-based financial aid?
A: For most students, institutional merit scholarships or grants are the largest source of funding students receive. Colleges will offer aid to students that they really hope to recruit. There are a few things that factor in…
How are a student’s academics? This includes a student’s grades, curriculum rigor, SAT or ACT scores, and whether they’re a national merit or commended scholar.
Do they have special talents or abilities? Are they an exceptional athlete or a great tuba player? Are they an Eagle Scout, a Girl Scout Gold Award recipient, or have they made a significant impact in their community?
Is a student of a particular background or ethnic profile? Colleges use grants and scholarships to entice populations of students they hope to recruit. Colleges have recruitment goals that include various aspects of diversity: economic, ethnic, intellectual, geographic, etc. This varies from school to school. Colleges might even pay to fly the student out for an interview in this case. And if they get in, they may offer scholarships as incentive.
Merit financial aid is based on who you are, what you bring to the table, and what the college’s goals are.
Q: What is need-based financial aid?
A: Need-based financial aid is tied closely to a family’s gross annual income and assets. It is determined by the FAFSA and resulting EFC (estimated family contribution).
Your family may make $40,000 a year, and your teenager will be the first in your family to attend college. They would be eligible for Pell Grants and other federally sponsored aid. You may also be eligible for subsidized and unsubsidized loans.
Aside from federal aid, colleges also do calculations of their own. They’ll look at the full cost of attendance (COA) including tuition, fees, room and board, and transportation. Then they’ll use a formula to look at what the family can provide (EFC) so they can offer the difference or a percentage of it. If you like math here’s a simple formula:
COA – EFC = YOUR “need” gap (which can be filled in a variety of ways)
Q: Which kind of financial aid should families apply for?
A: Well it depends… If you’re not able to qualify for need-based aid, then you’ll want to defer to merit aid. If you’re able to qualify for both, you can and should use both.
When working with families, I assess what kind of family financial profile they have. From there, we can find a strategic way forward.
Types of Family Financial Profiles
Q: What is a family financial profile?
Typically, I look at 27 different kinds of family financial profiles. But in a simplified version, I would look at the level (high, medium, or low) of the family’s income, the family’s assets, and the student’s academics or special talents.
For example, say there’s a family with…
High assets, medium income, and high academics. This student might want to attend a college that really rewards merit.
Low assets, low income, and high academics. We might suggest that the student apply to an Ivy League school because if that student gets in, all of their expenses might be paid for.
High assets, high income, and lower academics. Maybe the family is going to be paying most of the tuition and fees, but they might be able to get the student into an institution that can work with them for academic success.
We want students to be able to achieve their goals and get value from the institution they go to.
Student loans are a controversial form of financial aid. For some families, it is a core value not to borrow any money for college. Other families do take out student loans, and their students pay them off after graduation.
Q: Should families consider taking out student loans?
A: I tell people that you just need to be responsible. Some families don’t have many assets or income to contribute, so they plan to use loans to cover all college costs. But there is a limit to how much money you can borrow in federal loans. For other types of loans, parents have to guarantee the money – which could have twice the interest rate!
I run into other families that say under no circumstances will we ever take out a college loan. But then we find that with the college that is appropriate for their student, use of loans may be essential.
Be wise about what kind of loans you take out and for how much. Students should take into consideration the profession they’re going into and the earning power they will have to pay them off.
Q: Should parents co-sign their teenager’s student loans?
A: I recommend parents be a little cautious. I like the student to have skin in the game even when the family is fairly well off. When they know that they are responsible for those loans, it makes college and graduating on time all the more important. They know they’re on the hook for their education!
Have more questions about student loans? Learn more and schedule a complimentary consultation.
There are plenty of scholarships out there. Your student is bound to find one that is a great fit for them and your family’s financial profile. If your student doesn’t qualify for need or merit-based financial aid, here are a few other options to consider…
Reserve Officers’ Training Corps (ROTC) Scholarships
The ROTC provides students with college funding in exchange for their service in the military. Many families think this means war and fighting, but the ROTC is not scary.
There are careers offered that are identical to civilian jobs. In fact, I worked in public relations for the US Air Force. It’s a chance for your son or daughter to serve their country proudly. In addition, these scholarships are often renewable.
Q: What do families need to know about ROTC Scholarships?
A: Some ROTC scholarships are only available at a number of schools. If your son or daughter wants to attend a particular school and ROTC scholarships are not offered there, this scholarship option may not be a good fit.
Additionally, they often require 4 years of service from your son or daughter after they graduate.
Essay and “Third Party” Scholarships
There are essay and “third party” scholarships that your teenager can apply for as early as junior year. Whether it’s from a local organization or a national company like Coca-Cola, essay scholarships are nothing to scoff at! Your high school college guidance office is a great place to start looking for local scholarships. Websites like Fastweb.com, Unigo.com, and Scholarships.com are also excellent resources!
While it may take a lot of work to put the applications together, the payoff can make a dent in the total cost of a college education. Just be sure your student balances the time spent on writing essays with time spent doing other things to earn money for college.
Think about it this way… Your college-bound teenager could take a full-time summer job at a fast-food joint and receive less than $400 per week. Or they could spend 40 hours writing a stellar essay that wins them a $10,000 scholarship.
Ask your teen to do the math. One pays $10 per hour; the other $1,000 per hour.
Which do you think they’ll want to do? Our experience suggests they’ll suddenly develop a longing to write scholarship essays.
Other Ways To Save On College Tuition
Q: What else can students do to make college more affordable?
A: CLEP and dual-credit classes can be taken during high school to avoid college basics. By speeding up your teenager’s college career, you can save you semesters of tuition.
Additionally, many colleges award credit for strong scores on Advanced Placement or International Baccalaureate exams. If your teenager’s school offers dual-credit, AP, or IB programs, consider signing up for them.
Now that we’ve gone over several ways to build a framework for paying for college, let’s talk about how you can help you college-bound teenagers shine during the scholarship application process through 5 straightforward steps to apply for college scholarships.
5 Straightforward Steps to Apply For College Scholarships
Choosing a college and paying for it is a business decision. Scholarships make it a smarter business decision. But sometimes, the applications seem more time-consuming than they are worth. Here are 5 straightforward steps to submitting college scholarships, so you can keep your momentum through the process.
1. Complete College Applications First
First, have your teenager apply for colleges. Then worry about the financing.
If you tuned into the first part of this 2-part series, you know to have the conversation about financing with your spouse and/or a financial advisor before you talk with your son or daughter too.
2. Get a Head Start
If you’re early in the game, have your son or daughter research scholarships they could be eligible for in their junior year or over the summer before their senior year. It may be hard to motivate some teens as college seems so far away, but remind them that it is much closer than they think! Use the math challenge discussed earlier.
3. Be the CEO of Scholarships
After the lengthy college application process, your teenager is going to be exhausted. Senioritis has set in, school festivities are in full swing, and they are becoming more and more of an adult each day.
You must be the CEO of scholarships.
Remember, scholarships help you just as much as they help your son or daughter. What motivates your particular son or daughter? Encourage them to stay on track.
4. Dip Into The Essay Archive
Working from scratch can be intimidating. But if there are already words on the page, it can be easier to get started. If your student has an archive of essays from classes or other applications, have them put them to use! They can touch them up to put in their respective scholarship packets.
5. Organize Your Scholarship by Deadline
Keep a close eye on scholarship deadlines to ensure that all of your student’s hard work doesn’t go to waste. Believe it or not, many completed scholarship essays don’t get submitted because the student forgot to submit it!
There is a great tool from Naviance Student that students can use for scholarship application planning.
You can find more details about topics covered in this blog in podcast episode #3 of Self-Accepted: Guiding Families Through College Admissions & Transitions.