Paying for College
Play video

Developing Your College Financial Plan
Most people don't pay for college in cash. Financial aid is available and most American community colleges provide an associate degree program that is the equivalent of the first two years of a bachelor's degree. That means you can transfer to four-year college or university after you graduate from a two-year community college. That alone will save you the higher tuition and room and board of a four-year school.

The final two years can be financed with a plan that includes Federal Student Aid, Federal and State Education Incentive programs, Federal student loan programs, college savings programs, and earnings. Tell your parents, grandparents, and other family members or family friends of your financial plan; your support system is much more likely to donate supporting dollars when they see that your ambition to get a college education has determination and a plan behind it.

Step 1: Select Your College Choices
The first step in your plan is to decide where to go for your education. Your first choice should be based on where you think you will get the best preparation for your chosen career.

Put that private college first on your list, if that is where you really want to be. Private colleges put increasing amounts of their income into student aid. Recent data from The College Board show that students at private colleges received an average total aid amount of $10,700, bringing the average total price for an academic year down from $20,082 to $9,382.

Put affordable back-up colleges on your list, too. Your second choice may well be a nearby community college. You can live at home, keep costs low, and transfer to a senior college or university to complete your degree program.

Step 2: Get Cost Information for the Colleges You Have Chosen
Get realistic costs from each college you want to consider. That means including housing, lab and books costs. If you are planning on going in two years, check out how much costs have risen over the last two years. That keeps your costs realistic.

Step 3: File Your Free Application for Federal Student Aid (FAFSA)
After you have a list of colleges and costs, you are ready to file the Federal Student Aid application. It's an important part of your future, because it will give you the amount of financial help you can apply for.

The FAFSA Formula
When you file your FAFSA, you will be asked to report income, savings, family size, family assets, number and identity of family members attending college, among other details. The information you provide on your application is plugged into a formula maintained by the U.S. Congress that gives you the dollar amount you and your family are expected to pay. You'll also know the dollar amount of eligibility you have for student aid during the year you apply.

This figure is called the expected family contribution (EFC). Your financial need or eligibility for student aid is the difference between the cost of attending the college of your choice, as calculated by the college, and your calculated EFC.
Here's the formula:
Cost of college - expected family contribution = financial need

The best and the most efficient way to file your FAFSA application is to use the FAFSA Web site, http://www.fafsa.ed.gov. This Web site includes everything you need to know about the application. There is a four-page pre-application worksheet that you can use before you attempt to file your FAFSA. The worksheet exercise lists all of the financial information that you must know before you can begin your FAFSA application. It will define who is considered a parent, what assets should or should not be included, what income should be included, and details regarding income taxes. After reviewing the worksheet, you are ready to file the real application. It's easy and convenient to file it on the Web.

The Benefits of Filing on the Web

• A Web application can be faster because the process uses skip logic. Depending on your answers, the electronic forms moves you ahead in the application process, so you may have to answer fewer questions.



• The Web application process also checks your information before you submit it, reducing the chances that your application will be rejected because of missing or contradictory information.



• Your application information can be saved and transmitted at any time from any location that provides Web access.

You'll need to file a FASFA for each year you attend college. If anything happens after you file that affects your expected family contribution, such as loss of employment, divorce, or disability, you can updated the information.

Your FAFSA becomes your Student Aid Report (SAR), a copy of which is sent to the colleges you are considering attending. When the college student aid office receives your SAR, they put together a student aid package that will meet your financial need. Your FAFSA is also an important part of the document chain for student loans.

Step 4: Determine the Financial Shortfall for Meeting College Costs
Your SAR tells you how much money you are expected to make each year and how much in student aid you can expect. After all the financial support and student aid opportunities are considered, you are likely to discover that you still have to provide some additional money to pay for college. There are a numbe3r of ways to cover the costs, including working, but student loans are the first choice of many college students.

Step 5: Consider Student Education Loans
How much you rely on loans to cover your college expenses if your decision. Weigh the amount of the loan against your post-graduate earnings to see when and how fast you can pay back the loan. Over the past two decades, there has been a 70-percent increase in federal student loan debt for the average graduate of a public college.

Step 6: Identify Other Resources, If Necessary
You could also consider private loans, perhaps from family members. You may be able to cover college costs by cutting your room or board expenses. Consider part-time employment, but be careful about too much work the first year. It's often the hardest academically, so don't expect to be able to work a tough schedule while you go to school full time. Getting grades that lead to graduation is you mail concern.

Step 7: Matching Your Choice of School to Your Financial Plan
Now that you have a good idea of how much money will comes from you, your family, loans, and financial aid, take another look at your school choices. If your first choice is too expensive, look to your other choices to see if you get more financial aid.

What if You Still Can't Afford College?
If you still can't enroll in a four-year plan, consider a two-plus-two program. These programs allow you to get the first two years of a four-year degree program at a community college that has a joint-transfer agreement with a four-year bachelor's degree college.

Visit the college where you plan to transfer for your junior and senior years. Make sure you know the courses you must take at the community college to make the transfer work. Save all you can in the first two years at the lower-cost community college. If you can live at home while attending the community college, you should be able to save even more. It may not be your first choice, but it works. Your goal is to graduate from college, even if you have to live at home for two years.