By Sabrina Manville
For Juniors, the rubber meets the road with respect to college research. You’re probably starting to build your list, investigating colleges that interest you, and perhaps planning your visits in the spring and summer months. As you dive in, you may be tempted to leave financial considerations off your radar for a later time. But it would be wise to start to pay attention to them. We know college finance is complicated – there’s a lot of jargon involved, and many unknowns. But here’s a simple list of three concepts you should understand before you get much farther along.
1. The Types of College Costs
A college’s published cost of attendance is the estimated budget for a student for one year of study. Here are the largest components of that cost of attendance:
Tuition: Tuition covers your classes. At many colleges, tuition is broken down by credit or credit hour with a specific fee per credit. The requirement for a bachelor’s degree is universal: students need to earn 120 credits to graduate. Some colleges may charge a flat tuition rate per semester or academic year, covering a typical range of credits.
In-State vs. Out-of-State Tuition: In-state tuition refers to the tuition cost for a student who is a resident of the same state as the public college or university they plan to attend, and out-of-state tuition refers to the cost for a student who is not. Out-of-state tuition typically is more expensive than in-state tuition but generally less than private college tuition.
There is no difference in published price for in-state and out-of-state students at private colleges, though there may be opportunities like special scholarships for local students.
Fees: Each school will have its own fee structure, so be sure to delve into the fine print to understand the fees charged at the colleges that interest you to avoid any surprises later. In some cases, tuition and fees are presented together—in others, fees will be itemized (and some may be able to be waived, though many are required).
Room and Board: “Room” is where you reside (e.g. a dorm), and “board” would include the cost of food (e.g. a meal plan). You may be required to live on campus and purchase a meal plan for some or all of the years you are in college. Typically, colleges will share an average figure for room and board but should also be able to provide detail on the variety of options (such as where you could save money, or spend more for that fancy dorm!).
Other Expenses: In addition to tuition, fees, and room and board, a true cost of attendance will also include estimates for things like books and supplies, travel, and other living expenses.
What this means for juniors: Track the cost of attendance for colleges you’re interested in. You probably won’t pay full price (studies show that only 12% of students do!), but this is the number from which financial aid will be subtracted, if you receive it – so it’s important.
2. The Types of Financial Aid
Financial aid helps you pay less than the full cost of attendance. More than 80% of college students receive some form of financial aid, according to the latest data from the National Center for Education Statistics. Depending on your family’s finances, demographics, and financial need, and your academic record and extracurriculars, you may be able to apply or be considered for all types of financial aid.
The tricky thing about financial aid is that you probably will get a different amount of financial aid from every college you apply to.
Grants and Scholarships are “free money”—money allocated for higher education expenses that does not need to be repaid. Both grants and scholarships can come from federal or state governments, or directly from a two- or four-year college or university. (They can also come from businesses, religious groups, civic associations, and nonprofit organizations—we call these “private scholarships.”) Many grants and scholarships are awarded on a competitive basis and can either be one-time gifts or recur over the duration of one’s education.
Federal Student Loans will need to be repaid, with interest, after graduation. They can be either subsidized or unsubsidized.
Subsidized loans are for undergraduate students with financial need. The term “subsidized” means that they do not accrue interest while the student is enrolled in college. Everyone is eligible for unsubsidized federal loans, though there is a limit to how much debt you can take. Federal student loans have lower fixed interest rates than private student loans as well as more flexible repayment plans.
Note: generally, a financial aid letter from the college will show the subsidized and unsubsidized federal student loans you are eligible for. Other loans—including government Parent PLUS loans or private loans—will be pursued by you at your discretion. Since private loans originate from private institutions, such as local banks, national banks, and credit unions, they can’t be considered financial aid. The same goes for Parent PLUS loans, which require additional verification to borrow.
The Federal Work-Study program funds part-time jobs at participating colleges and universities around the country, enabling students to earn a pre-set amount of money each semester to put toward education and living expenses. Although anyone can seek work during college, including on-campus, work-study is officially part of some financial aid packages as there are funds set aside for a certain number of needy students.
What this means for juniors: look into what colleges say about their financial aid as you do your research. What types are available? What share of students receive the different types of aid?
3. “Need-Based” vs. “Merit-Based” Financial Aid
Financial aid is divided into two categories: need-based and merit-based. Almost all financial aid provided by federal and state governments is need-based financial aid. Colleges award both need-based aid and merit-based aid.
Need-Based Financial Aid is awarded strictly based on a student’s financial profile, which considers the student’s family assets and income, not the student’s academic merit. (Colleges, of course, will consider academic merit when deciding whether or not a student should be admitted—but it doesn’t factor into this aid calculation.) Need-based aid can include a combination of grants, scholarships, subsidized student loans, and work-study.
Merit-Based Financial Aid is based on a student’s accomplishments and talents in academics, athletics, arts, and volunteer or charitable works. Merit scholarships are typically, though not always, need-blind, meaning that a student’s financial profile is not considered when determining their candidacy. They sometimes require an application or selection via committee. Often merit scholarships act like discounts, meant to make the college more attractive to high-quality students.
What this means for juniors: you may be eligible for both need-based and merit-based aid depending on your family’s finances and the college you’re applying to. Investigate whether colleges offer both, and who is eligible.
Sabrina Manville is co-founder and COO of Edmit, which helps families make great financial decisions about college. This post was adapted from her upcoming book, Better Off After College: A Guide to Paying for College With More Aid and Less Debt. To learn more and sign up for early access, visit https://www.edmit.me/betteroffbook