If you or your child is heading off to college in the fall, financial planning is critical. According to the Iowa College Student Aid Commission, 60% of 2013 graduates from Iowa’s regent universities owe an average of over $28,000 in student debt. Despite the high and rising cost of education, you can take steps to control these costs and begin professional life without crippling debt.
Applying for Aid
The first step in getting college aid is to fill out the Free Application for Federal Student Aid (FAFSA). This form is required to qualify for federal higher education aid programs and for many state, local, and school-based programs as well. It casts a wide net, assessing your eligibility for federal loans, grants, and work-study funds. Even if your or your parents’ incomes are high, if you enter college at a nontraditional age, or have less than an impressive G.P.A., you may qualify for help with college expenses by filling out this form, which is available online. It is important to get it filled out on time, and the earlier the better. Getting your FAFSA in as early as possible increases the likelihood that you will have funding lined up before the school year begins. For more information, see the Federal Student Aid website.
Be sure to research grants and scholarships as well. Look into funding available for your chosen career path, for specific groups to which you belong, for students of your particular school, and for your local area. Iowa offers a wide range of grants and scholarships for its students. Learn more at the Iowa College Student Aid Commission website.
Planning for Repayment
Programs are also available to help students reduce the burden of their student loan debt. In addition to the recent expansion of the Pay As You Earn (PAYE) program, which qualifies an additional 5 million graduates for reduced student loan payments, many programs exist to lighten the financial load for specific sets of borrowers. Thinking about your career path with these types of programs in mind can allow you to develop a plan to minimize the debt you will need to repay after you begin working. Some of the better-known fields to offer generous loan repayment terms include education, health care, and government service. The state of Iowa offers its own set of programs to reduce debt for some graduates. Find details at the Iowa College Student Aid Commission website.
The most effective way to minimize the burden of repaying student loan debt is to borrow as little as possible. To do this, you must first create a budget. For most college students, the practice of budgeting is unfamiliar. While they lived at home and had their day-to-day expenses paid for them, the money they had available to spend was generally whatever was in their pockets or bank accounts. Even those forward-thinking high school students who put some of their earnings in to savings are generally unused to having to meet daily expenses on a long-term basis. Before heading off to college in the fall, generate a list of regular expenses you will have to meet. Take a parent-child trip to the grocery store, during which the new college student compiles the shopping list and pays attention to how much the items actually cost. This will help establish a baseline grocery budget. Then account for other anticipated expenses, including school costs, housing, transportation, clothing, household items, and anything else the student will be responsible for paying. Don’t forget to include a reasonable entertainment allowance.
Once you have an idea of your costs, make an estimate of how much you will need to borrow to make up any difference between what you earn, have available, and get covered by scholarships and grants. Borrow only what you need, keeping in mind that it is a good idea to have an extra three months worth of living expenses available in case of emergencies.
Education planning is most effective when it begins early in life. If you have younger children, Boelman Shaw can help you get a head start on college financial planning with a variety of tax-advantaged savings plans. Contact us to find out how you can financially prepare for your children’s higher education.
Material discussed herein is meant for general illustration and/or informational purposes only. Because individual situations will vary, the information shared here should be used in conjunction with individual professional advice.