Budget Now For Your Freshman Year

							Youve already taken the PSATs, ACT, and SATs. Youve visited the college campuses,
taken the tours, had the interviews, mailed the thank-you notes, filled out the
applications, completed the essay questions, paid the application fees, sent the letters
of recommendation, and requested the transcripts from your guidance office. Now is
the time to have a frank talk with your parents about money. Remember that unless
you have older brothers or sisters, this is new to them too, and they may be worried
about how much youll need and whether theyll be able to afford it. There are a lot of
myths about college costs. Some parents are worried because theyve heard it can cost
as much as $40,000 per year to send a child to college (and there are some private
colleges which do cost this much). However, the average tuition at a private school is
around $15,000 and many private institutions offer comprehensive aid packages.
Public state universities average only about $3,000 per year in tuition (plus you may
be able to live at home). Dont make any assumptions about costs until you receive
your financial aid award letter. Income Ask your parents if the family has savings that
can be applied to your college expenses. If they have saved substantially for college,
you are lucky. Recent studies indicate that most parents have not saved enough for
their childrens educations. This is due partly to the fact that the cost of college has
increased 234% during the last 15 years, while household income has risen only 82%
during the same period. Even if they have not been able to save, your parents may be
able to borrow from their home equity or establish a line-of-credit which can be used
to help with your expenses. Or they may be able to contribute out-of-pocket income.
For example, they may be able to send you a monthly allowance or pay some of your
bills by credit card. Be sensitive to cost issues, research and consider all the options
and be willing to help with expenses in whatever way you can. About 75% of parents
help their children with some of their college expenses and about 50% of parents
provide over $1500 per year in assistance. Although many students believe they can
get scholarships, a survey by The Chronicle of Higher Education found that only
about 17% actually receive oneand the dollars may be small. However, every year,
scholarship dollars go unclaimed because no one has applied. There are good
scholarship sites on the Web. Search under scholarship to locate sites, then see if your
personal situation matches any scholarship criteria. The specific schools to which you
apply will also have scholarships available which will probably not be listed publicly.
Ask the financial aid office of each school youre considering if there is a list of
school-specific scholarships. There is no need to pay for scholarship information. Be
suspicious of any offers you receive (by phone or mail) of guaranteed scholarships in
return for a fee. In addition to scholarships, most colleges offer grants and work-study
options. 30-40% of students receive some money from this type of aid. About 50% of
students save money from summer jobs and apply it toward college expenses. And
about 25% of students have a part-time job off-campus to help with expenses.
Increasingly, financial aid means loans. There are two broad types of education loans:
government loans and private loans. Government loans include Federal Stafford loans,
(for students) and Federal PLUS loans (for parents). In the past, these loans were
based on need. Now, however, all students and families are eligible to apply. Many
major banks and credit unions offer private loans. Major differences include the
following: Federal loans are guaranteed against default by the federal government and
therefore carry less risk to the lender. For this reason, the interest rate is usually lower
on a federal loan than on a credit-based private loan. Processing time is longer for
federal loans. Federal loans must be certified by the government and the school where
you are enrolled. The process takes from 4 to 6 weeks after which you may apply for
a loan. Private loans are quicker: you can be pre-approved for some private loans in
less than 5 minutes. Maximum loan amounts are generally higher for private loans.
Federal Stafford loans for freshmen are capped at $2,625. Private loans vary in their
maximum amounts, but may go as high as $100,000 over four years. Payment terms
vary. Federal Stafford loans (but not Federal PLUS loans) and most private loans
allow you to defer payments of principal until you are out of school. Federal loans
have a 10 year maximum repayment term. Private loans generally offer a longer
repayment period. A longer repayment term tends to decrease the monthly payments,
but increases the total interest cost of the loan. Private loans are private. Only your
lender sees your financial statement and application. Many students apply for the
Federal Stafford loans first, then look to private loans to finance the balance of their
expenses. About half of the college students graduating today owe an average $10,000
in student loans. Expenses The biggest cost will be tuition. In general, your home
state university will be the least expensive and a private college will be the most
expensive. Out-of-state tuition at another public university will be somewhere in
between. Room and board averages about $4200 per year for a student at a public
college who lives in the dorm; about $1800 for a student who commutes. At a private
college, respective costs are only slightly more. Books and supplies average $615
across all colleges. The other major cost will be transportation. If you are a commuter,
your costs will be higher. If you can do without a careven for a couple of yearsyoull
save not only on car payments, but on gas and maintenance, car insurance and campus
parking permits (which can be as much as $100 per semester!). Many colleges
discourage cars due to lack of parking space. Some colleges outright ban them for
freshmen and sophomores. If youre going far away, youll need to consider plane fare.
Just a couple of trips home may cost as much as room and board for a month. As
eager as you may be to be on your own now, by Thanksgiving youll probably want to
see your family again. Payoff Although it may seem like a lot of money right now,
additional years of education pay off substantially - both in the near term and over the
course of your lifetime. The U.S. Census bureau reports that whereas the mean
monthly income of the average American was $1,687 in 1993, a person with an
Associates Degree earned $1,985 per month and a person with a Bachelors degree
earned $2,265 per month. In 1996, average annual income for a family headed by a
high school graduate was $45,146; for a college graduate, it was $75,311. For each
dollar invested in higher education, the average student receives from $15-$30 in
return throughout a lifetime of earning. Otherbenefits include lower rates of
unemployment and better health and insurance benefits. Education is not just about
money. With additional education comes a broader knowledge of history, literature,
and the arts and sciences, which can give you a deeper understanding of yourself and
the world. And a college experience provides you with a wide network of new friends:
others with similar interests and experiences, many of whom may become lifelong
resources for you as you move forward in your community and in your career. Look at
making a financial plan now as a part of your education. Learn all you can about your
options. Learn how money works. As time passes, evaluate your plan to determine
how realistic it is. If you make a financial plan and you periodically evaluate it, you
will have learned more than most people ever learn about how to use money to
achieve goals.
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