Without fail, one of the most common questions both parents and students ask is “How do I save/pay for college?" And while I won't try to pass myself off as a financial advisor here, I can present an overview of calculating college expenses, as well as some helpful tips that will help get you oriented around college expenses.
Each school varies when it comes to cost of attendance, but the method used in the calculation is much the same. The estimate includes the cost of tuition, fees, room, board, books and supplies. They also throw in an allowance for transportation and personal expenses to give a more accurate price tag. While this number is useful for giving you an idea of how much each school costs, it's also used by the school itself to determine financial aid eligibility amounts.
In order to determine your aid eligibility, the cost of attendance is compared to a number called the Expected Family Contribution (EFC), which is the amount of money the family is expected to contribute for the year toward the student's cost of attendance.
If you're in high school and your family has already started to save when it comes to your college tuition, great! But don't worry if that's not your situation; there are a lot of options for paying for college, especially if you focus on earning high test scores and grades. While financial aid is based primarily on demonstrated need, applicants who are especially desirable to a college because of their strong academic performance or athletic or artistic talent may receive preferential assistance — basically, a more lucrative financial aid package, whether it's a higher total amount or is comprised of more grants or scholarships than loans.
No matter when you plan to attend college, if you're not already saving, start now. Every little bit helps, and if you can put your money into a high-yield investment or savings account, it will earn compound interest — that means more money for college. If your parents are saving for you, their accounts and investments should be in their names — putting that money in your name could impact your eligibility for financial aid.
According to the College Board, as of 2017, the average sticker price (tuition, fees, room and board) for one year at a public four-year college was $20,770. One year at a private four-year college will cost more than twice that, at $46,950. The current rate at which college costs are increasing is about four percent per year — believe it or not, this has fallen off from trends indicating a six percent annual increase in recent years. While we can't predict the future with perfect accuracy, it's clear there's a lot to save for when it comes to college.
Fortunately, you have plenty of useful resources to tap into when it comes to finding scholarships and helpful guides like Paying for College, which is packed with investment tips for saving money for college and line-by-line strategies for completing the FAFSA to help you maximize your eligibility for financial aid.
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