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More than half of all American college students or their
families borrow part of the cost of their education.
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When your child is ready for college, will you be ready to pay for
it?
That's the question you're probably going to
face, even if you've been actively investing in a college fund since your son
or daughter was small. Financial aid, in the form of scholarships and loans, may
provide the extra funding you need. But to apply for it, you must supply detailed
information about your family's finances on the Free Application for Federal
Student Aid form (www.studentaid.ed.gov/sa/fafsa).
 That information determines whether your child will qualify for
federally funded loans and the amount you're expected to contribute to the annual
cost of the education. You get a copy of the report, and so does each of the colleges
to which your child applies.
You may have to file a separate application for state-sponsored
aid, and some colleges require individual financial aid applications in addition
to the federal form.
FACTORS THAT DETERMINE AID ELIGIBILITY:
- Family income
- Family's savings and investments
- Student's savings and investments
- Number of other students in the family also paying tuition
- Family expenses, both ordinary and unusual
FACTORS THAT INFLUENCE WHAT YOU GET:
- Financial resources of the college or university
- Needs of other students
- Special interest in your child
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FOUR YEARS' WORTH When a college
offers a financial aid package, it's usually for one year at a time. The amount
can be - and often is - less after the first year, even if the student does well.
Ask the college to make a four-year commitment as long as your child meets academic
requirements. You've got nothing to lose. Colleges are sometimes willing to
negotiate.
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LINING UP THE MONEY The US Department
of Education is the most important source of education loans. Student loans are
made directly to applicants who complete the Free Application for Federal Student
Aid (FAFSA), and may be either subsidized or unsubsidized. Subsidized loans require
demonstration of financial need and offer lower rates. In addition, the student
is not responsible for interest that accrues while he or she is enrolled at least
half-time. Unsubsidized loans are not linked to financial need but have higher interest
rates. Borrowers are responsible for all interest that accrues. There is also a
Direct Loan program for parents, known as PLUS. For more information, go to www.studentaid.ed.gov.
SPREADING THE PAIN
You might look into the year-round payment options some colleges offer. They let
you divide the year's cost into ten or more equal payments, usually for a small
fee. Your money may earn enough in
interest or
dividends to offset the charge - and then some.
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