If your child is applying to colleges, be prepared to make a huge financial investment. With the rising cost of education and the changing nature of financial aid, there is a need for parents to be more involved, both financially and otherwise. The FAFSA and the CSS PROFILE explicitly ask for details about parental income, tax returns and financial assets. In fact, the amount of financial aid you receive is heavily contingent on these variables. If you are hoping to get a decent form of financial aid, you must play your cards right.
Make a definite financial plan and start early
Statistics have shown that tuition fees at public universities increased at an average of 4.8% in 2012 (1) which is twice the rate of inflation. At this rate, the overall annual cost of college education at a public university will be somewhere close $22,200 in 2013. The bad news is that the rate of increase shows no signs of stagnation. There is only one way out; start saving as early as you can. Even if you can save a small amount every month, it can yield excellent returns over a long period. The more you save, the less you will have to borrow.
To get an estimate of the amount of money you should save, refer to one of the many college fee calculators available online. Similarly, there are calculators which provide rough estimates about your Estimated Family Contribution (EFC) according to your annual income and savings. Keep these numbers at the back of your mind and make plans accordingly.
Apply for federal aid by filling out the FAFSA
Irrespective of your financial condition, you must apply for federal aid by filling out the FAFSA. This detailed form will ask you about your annual income, tax returns, financial assets, and savings. Based on this information, federal authorities will calculate your EFC or the amount of money you can devote to your child's education every year. The rest of the money (i.e. the cost of a college education minus the EFC) will count as your demonstrated need. If you have a relatively high income, the authorities will assume that you had opportunities to save in the past and your EFC will be higher.
The EFC also depends on several other factors. If you are divorced, the income of the custodial parent is taken into account and federal aid is usually higher in case of a single parent. Alternatively, if you re-married, the income and financial assets of your second spouse will be considered while calculating the EFC. Additionally, if you have more than one child in college simultaneously or younger ones at home, you are likely to get more federal aid.
Be on the lookout for scholarships provided by colleges
Due to the exorbitant costs of college education, even high income families might need external aid. However, their chances of finding sizable federal aid through FAFSA are pretty bleak. In such cases, contact the financial aid division of your child's college and collect information about merit-based scholarships
which are awarded on the basis of academic and extracurricular achievements. At the same time, there are several third-party organizations like the Gates Foundations or Rotary Clubs which provide scholarships and grants to exceptional students. Don't shy away from these opportunities. Support your child in applying for them.
Remember the deadlines
Many scholarships, grants and student loans are provided on first come, first serve basis. Therefore, you must apply for these as soon as possible. For instance, federal authorities start accepting the FAFSA from the first day of January. Get all your documents together and complete the FAFSA right away. Similarly, contact the colleges that your child is applying to and inquire about their specific forms to be filled out and their respective deadlines. Remember, you are one among many parents who want financial aid for their children. Simply put, it'a a race and you have to stay ahead of the competition.
Be prepared for the future
An average college degree is four years long and your financial condition may change during this time. You could lose your job or buy a house or another one of your children could go to college. All of these factors will have a significant impact on your financial situation. Hence, the FAFSA is updated each year to reflect changes in your family's financial situation. Start making small savings accounts so that you can see your family through any unforeseen circumstances. Finally, support your child in every possible way during this phase. He or she might not show it, but chances are that he or she is just as intimidated as you are.