If you’re heading off to college, you probably don’t have $32,405 sitting around in your bank account — you might not even have a bank account yet.
But that’s the average cost for one year at a private college today. After four years, you could be looking at a tuition bill of $129,620.
Of course, you have more affordable options when it comes to college, and your parents might help foot the bill. But whatever school you choose will come with a hefty price tag. So how can you pay for tuition, fees, and living costs? How can you manage your money strategically during college?
To learn more, I spoke with Mark Kantrowitz, a financial aid expert and publisher of Cappex.com. Here’s his best college financial aid advice for students and new grads.
1. Understand the different types of financial aid
Most students and their families don’t pay for college entirely out-of-pocket. They get help through financial aid.
“Financial aid is provided by the federal government, state government, the college itself, and private funding sources,” said Kantrowitz. To get aid, you must submit the Free Application for Federal Student Aid (FAFSA). Some colleges also require an additional form called the CSS PROFILE.
Although financial aid is sometimes referred to as an award, don’t assume that all financial aid is free money. Financial aid refers to both the money you don’t have to pay back (grants and scholarships) and the money you do (student loans).
2. Know how to get the most financial aid
If you want to know how to get the most financial aid, the date you submit the FAFSA could have something to do with it. Although the federal deadline is in June, you should fill out the FAFSA as soon as possible. The earlier you apply, the more financial aid you could get.
“A dozen states award state grants on a first-come, first-served basis,” said Kantrowitz. “If you file later, you may miss out on state and institutional aid, and even some campus-based federal student aid.”
Since the government looks at annual income, you or your parents should also be strategic about how much you have in the bank.
“Avoid artificial increases in income during the base year, such as realizing capital gains or taking a distribution from retirement plans,” said Kantrowitz. That way, the government is less likely to overestimate your expected contribution.
Despite your efforts, though, your financial aid package still might not cover the full cost of college. The federal government, for instance, sets a federal loan limit of $31,000 for dependent students and $57,500 for independent students (or dependent graduate students).
If your financial aid package falls short, you can try negotiating for more financial aid. “If you have special circumstances that affect your ability to pay for college, appeal to the college financial aid office for a professional judgment review,” advised Kantrowitz.
And if you still have a gap, consider whether you want to take out private student loans. Of course, first make sure you understand the terms of your agreement. If you take on too much debt, you could find yourself facing high student loan payments for 10 years or more after graduation.
3. Have a plan if you run out of money during college
Despite your best-laid plans, you might find yourself struggling to get by as a college student. If you run into financial hardship, speak with your college’s financial aid office about how to get help.
“Some colleges have emergency loan funds to help students who run into unanticipated problems,” said Kantrowitz. “The college’s financial aid administrator can also help you identify additional sources of funding.”
For instance, you can still apply for scholarships after you’ve started college. You could also consider a part-time job to make more money. Taking on additional loans is another option, but you should proceed with caution before adding to your debt.
Make sure to speak with a financial aid officer for advice. Taking out additional private student loans should usually be a last resort.
4. Avoid taking on too much student debt
It’s all too easy to take out student loans without thinking about the long-term consequences. After all, you could take out a loan for freshman year four and a half years before you have to start repaying it.
But repayment will kick in eventually, and you don’t want the burden of huge student loan payments just as you’re starting your career. To help out your future self, minimize the amount you take out in loans.
“The most common mistake students make with student loans is to borrow too much money,” said Kantrowitz. “They then treat the financial aid ‘refund’ as though it were free money, even though it usually comes from student loans, which must be repaid — usually with interest.”
One way to avoid over-borrowing is to estimate your first year’s salary out of college. Research a few jobs you’re interested in to get a sense of their average annual earnings. “Aim to have total student loan debt at graduation that is less than your annual starting salary,” advised Kantrowitz. “Ideally, a lot less.”
He also encouraged college students to live cheaply. Cutting down costs as a student is easier to do in college than afterward. “Live like a student while you are in school,” Kantrowitz said. “So you don’t have to live like a student after you graduate.”
5. Start developing savvy money habits today
Most of us never get a class in personal finance — we’re left on our own to sink or swim. That’s why you may need to take your money management into your own hands.
Find out if your school offers a financial literacy course, and rely on resources such as personal finance books and blogs. “Read one of the books by Suze Orman or Beth Kobliner,” suggested Kantrowitz. “They are a great way to learn how to manage your money.”
He also encouraged students to record their spending. You don’t necessarily need to set goals at first. Instead, become cognizant of how you spend your money.
“I often recommend creating a descriptive budget — as opposed to a prescriptive budget — where you track all of your spending every day by recording it in a spreadsheet or a program like Quicken or Mint,” said Kantrowitz. “Increasing awareness of your spending is the first step in exercising restraint.”
With practices like these, you’ll develop strong money habits for the rest of your life. Plus, you’ll be that much more prepared when it comes time to repay your student loans.
For more college financial aid advice, here’s how to avoid taking out more student loans than you need.
Need a student loan?Here are our top student loan lenders of 2018!
|1 Important Disclosures for CollegeAve.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or Nationwide Bank, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Information advertised valid as of 11/1/2018. Variable interest rates may increase after consummation.
2 Important Disclosures for Discover.
3 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for PNC.
PNC Bank is one of the nation’s largest education loan providers. For over 40 years, PNC has been committed to helping students and their families make possible the adventure of college.
6 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2018 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
7 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
8 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
9 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|3.94% – 12.78%1||Undergraduate, Graduate, and Parents|
|4.06% – 13.06%3||Undergraduate and Graduate|
|4.34% – 12.99%2||Undergraduate and Graduate|
|4.25% – 11.10%*,4||Undergraduate and Graduate|
|5.03% – 11.23%5||Undergraduate and Graduate|
|4.12% – 13.13%6||Undergraduate and Graduate|
|5.62% – 10.01%7||Undergraduate and Graduate|
|3.93% – 9.81%8||Undergraduate, Graduate, and Parents|
|4.26% – 12.13%9||Undergraduate, Graduate, and Parents|