ARTICLE BY : PAT GRENIER , CONTRIBUTING WRITER
Americans now owe $1.5 trillion in Student debt (second only to mortgages) U.S. Education Secretary, Betsy DeVos, declared late last year that student loan debt was now a crisis. Others have stated that we are not at crisis levels yet. Regardless, a better understanding of financing options, the complexities of the loans, scholarships, etc. should help to minimize the negative effects of this daunting situation.
Much of this burden is falling on the shoulder of parents. In many instances, parents are not funding their retirement plans and focusing on paying college costs. In my opinion, even if it means the student will need to take out more debt, the focus should be saving for retirement for the parent.
Perspective students and parents should consider all options, such as; scholarships, grants, loans, and gifts, work study. One option to minimize the cost of college is to go to a community college and transfer to a four-year program. The savings are well worth it. Above all, an important consideration, is to look at the earning potential of the chosen career and whether it is worthwhile to attend a particular school knowing that the potential income will not be able to cover that loan.
FAFSA – (Free Application for Federal Student Aid) Most students are required to fill out. It is not the easiest and requires time. This form will determine how much aid a student is eligible for and what the Expected Family Contribution is. NerdWallet reports that in the 2016-2017 school year, more than 1.2 million high school graduates didn’t fill out the FAFSA, and of those, 648,191 of them would have been eligible for a Pell grant. This left a total of more that $2.3 billion on the table of unclaimed, free money to put toward tuition bills.
SCHOLARSHIPS – Students should apply for as many scholarships as possible. There are thousands available – it just is a matter of finding them. Many of them are Merit based not based on financial need. A good place to start is scholarships based on the student’s area of concentration, those from groups such as trade organizations, Rotary, etc. In addition, local and professional civic organizations. I know a student who made it their career to apply for scholarships that she had her entire college cost paid for.
AWARD LETTERS – Students and parents should familiarize themselves with the terms in the letter. Know if the student is receiving a grant, scholarship, a subsidized or unsubsidized loan. Obviously, the less out of pocket from the family the better.
The key is to start planning early, not only financially using college funding options such as 529 Plans, but; making sure the student is involved in extracurricular activities, sports, volunteer work, etc. Colleges look for well-rounded students.
In many cases trade schools are an inexpensive alternative.
Parents should talk to their children early on about how college cost will be funded, what is expected from the student setting realistic goals.
ABOUT THE AUTHOR:
Pat Grenier is a General Partner with BRP/Grenier Financial Services in Springfield, MA. Securities and Advisory Services offered through Cadaret, Grant and Co., Inc., a Registered Investment Advisor and Member FINRA/SIPC. BRP/Grenier Financial Services and Cadaret, Grant and Co., Inc. are separate entities.
Pat can be contacted by phone at (413) 736-6712, or email her at email@example.com