Deciding Now How to Finance College

College applications went out January 1st for most regular decision schools. Acceptance and award letters will be sent out by April. As a senior, you are one month into the waiting process and have two months more until you receive any news about where you will spend the next four years. After all the craziness of last semester, what more could you possibly need to do before you start getting those letters from colleges? You may not know it, but now is a crucial time to answer financial questions with your parents.

With every financial decision comes a fierce battle between your mind and your emotions. The entire advertisement industry is centered on helping your emotions win over your mind in the decision process. It’s a helpful activity to watch advertisements to analyze the ways in which companies try to persuade you to buy their product. Few attempt to appeal to your logical side, opting instead to engage you emotionally. Most Colleges and universities play a very similar game that companies play, and the sooner you realize this, the more effectively you’ll be able to make a sound decision that you can later be excited about.

If you filled out a FAFSA, you should have received an estimated EFC (estimated family contribution), which is the government’s prediction for how much your family should contribute toward your college education. The rest of the cost of your education is your financial need. When you receive your award letter, you will see how much of that need you will not need to pay back (federal grants, scholarships), how much you will need to pay back with interest (federal loans), and how much you will pay back through work (work/study programs). Clearly, you want the majority of your financial need to be met by grants and scholarship.

Come April, every announcement made by colleges will be aimed at drawing you to their institution and not to another. Even the title “award letter” sounds like you’ve won the lottery, despite the fact that your “award letter” might contain loans, to be paid back in full with interest. You need to view award letters with the same skepticism with which you view credit card pre-approval letters. Just because someone says “congratulations” or “awards” you with something does not necessarily mean that they are offering you a deal. Particularly because these letters will have a significant impact on your and your family’s finances in the coming four years or more, you need to read past the emotional language to the underlying facts. For more information on how to read a financial award letter, take a look at Stuart Canzeri’s helpful blog post at Peachtree College Planning in which he delves into the specific language of the letters to get at the financials. If you're in the Atlanta area, you can also attend one of his upcoming workshops that will cover the areas of college admissions, the Hope Scholarship, financial aid and college funding.

Because you are in a better position to think logically and rationally now than on May 1st about financial decisions, you will want to prepare yourself for the news that you will receive in two months. Now is the time to sit down with your parents and grandparents and discuss how you all will finance your college education. Think through the following questions:

• Who will be responsible for the expected family contribution, and if multiple parties are involved, who will pay what?
• How much in student loans are you willing to take on each year in order to make up the difference?
• Will you be expected to work while in college to help finance your education?
• If there is still financial need remaining even after considering federal loans, will you consider taking out private loans? If so, will your parents be willing to co-sign for those private loans?

If you can make firm or negotiable financial resolutions between now and May, that will put you in a much stronger position to appeal an award letter or to negotiate with colleges for a better deal. Make sure to answer these questions before colleges begin playing to your emotions.

Here are some helpful calculators and sites to consider as you think through these questions:

• Cappex and Fastweb are free services that help connect students to billions of dollars in scholarships.
• Scholarships for High School Seniors – If you are looking for scholarships to offset the cost of college, you might begin here. You can search 59 pages of scholarships to determine which ones you qualify for.
• Repayment estimator – This calculator allows you to see how much you would pay each month based on initial loan balance, interest rate, and your estimated salary after graduation. It can help you determine what type of loan to take.
• Student Loan Calculator – This calculator will actually create an amortization table, showing what portion of each month’s loan payment goes toward interest and toward principal.