Bridging the College Funding Gap

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There comes a point when it’s finally time to answer the childhood question, “What do you want to be when you grow up?” If your career path requires college, there are many decisions that must be made before you take that first step on campus.   One of the initial questions many families have is “how do we pay for college?” According to U.S. Department of Education, the average full-time in-state student at a public four-year college spends $14,900 annually.

How college lending works

It starts by determining your Cost of Attendance (COA) which is set by each university. COA is based on direct costs and indirect costs of attending college. Direct costs are paid directly to the school and include tuition and fees plus room and board. Indirect costs are usually paid to something other than the school. Examples of indirect costs include transportation, books and supplies, living and personal expenses. Your lifestyle choices can dictate indirect costs.

 

Next, your Student Aid Index (SAI) is determined. (Note: the SAI used to be called the Expected Family Contribution (EFC). This is the amount of financial aid a student is eligible to receive. This amount comes from the Free Application for Federal Student Aid (FAFSA). When you complete the FAFSA, it applies to a single academic year. That means you need to submit a FAFSA application each year—and make sure you meet the FAFSA deadlines for state and college aid to maximize the amount and types of aid you could receive. Your financial need is calculated by the Cost of Attendance minus the SAI.

 

If your SAI is more than the COA, then the government says you can afford that school. So, based on your FAFSA (the income and savings of the parents and student), you would not be eligible for need-based aid. Everyone's situation is unique, and even if your SAI is more than your COA, you might still need financial assistance to pay for college. Students who don’t qualify for need-based aid can also be considered for merit-based aid, such as scholarships and grants, which is not affected by parent/student income or SAI.

 

If your SAI is less than the cost of attendance, then you demonstrate financial need.

Funding options

There are numerous sources of money available to students when it comes to paying for college. Colleges cover financial need in the best-to-worst order. This means the "free money" they give to students through grants and scholarships are awarded first. These do not need to be repaid by the student.

 

Students can also receive funding directly from their school through work-study programs. Work-study is only available for students who demonstrate financial need. If you qualify for it, you’ll see it on your financial aid offer. The way it works is the student works at an on-campus job, and the paycheck you receive is the funding that is noted in the financial aid offer. It’s important to note this is not a lump sum payment you receive but is paid through your on-campus job via your paycheck.

 

If you need these funds up front to cover the costs at the beginning of the school year, they will not be available.

 

If you've exhausted all forms of university funding, and you still have a bill to pay, it's time to consider student loans.

Federal Student Loan through the FAFSA

• The best student loan option with the lowest rate.
• The loan is in the student’s name.
• $5,500 is the most a freshman can borrow. Sophomores can borrow up to $6,500. Juniors and seniors can borrow up to $7,500. A student can borrow up to $31,000 in their lifetime.
• Can be used for students who are determined to have a financial-need (subsidized loans) or for students who do not meet the need-based criteria (unsubsidized loans). Students may be offered a combination of subsidized and unsubsidized loans.
• Apply by completing the FAFSA. Most students typically need to accept their award in their online student account because the loan flows through the school.

Federal Parent PLUS Loan

• In the parent’s name and non-transferable to the student.
• Eligibility is not based on financial need, but a credit check is required.
• The interest rate is the same for all borrowers and is not based on credit history.
• Information may be included in the financial aid letter.
• Apply through Studentaid.gov.

Private Student loans

• Available through banks or credit unions.
• Can be in the student’s name with a cosigner or a parent loan in the parent’s name.
• Interest rate based on borrowers’ credit history.
• Most likely not included in financial aid letter.
• Apply directly with the financial institution.

CommunityAmerica’s Student Loan

• The loan is a line of credit that allows you to borrow up to the full cost of the remainder of your education without having to re-apply each year.
• Competitive rates plus discount with autopay.
• Flexible repayment options.
• Co-borrower release option which allows the co-borrow to be removed from the loan once the student can quality on their loan.
• Apply online at CommunityAmerica.com/Student-Loans.

Start the conversation early and include everyone who is involved in paying for college. It’s never too early to decide who is paying, how much you are willing to pay, who is borrowing and how much you are willing to borrow. When scholarships, grants and federal aid aren’t enough, private student loans can be a necessary and cost-effective way to fill educational funding gaps. At CommunityAmerica, we want to make financing college easy so you can focus on achieving your dreams of higher education at the school of your choice.

 

And if you have any questions along the way, get in touch with our dedicated College and Career Planner, Karly Scholl, for individualized guidance for your future plans.

 

More Resources

 

All loans subject to credit approval.