The Supreme Court decisions that struck down affirmative action programs and President Biden’s student debt cancellation plan will affect millions of people, whether they are applying for college or trying to pay for it.
For the first time in three years, student loan repayment is set to resume after a pause at the start of the pandemic, and Tara has created a guide to resuming here. The Biden administration plans to implement a new income-driven repayment program that could lower monthly payments for millions of people. Tara has an FAQ for that as well.
And last week, the Biden administration pledged to try a new legislative tactic for widespread student debt cancellation, using a different law than the one on which its failed effort hinged. Here is the article written by our colleague Charlie Savage about it.
We asked readers to send us their questions about paying for college and answered a selection of them below.
Preparing for the Cost of College
How is it possible to afford college?! It’s scary. How can we get our 18 year debt into six figures? It feels irresponsible. — Janet Green, Burlington, Vt.
The most reassuring answer to this question is that Kevin McKinleyfinancial planner in Eau Claire, Wis., gives: Think about it in chunks.
If you can save half, a third, or even a quarter of the cost of college for the first 18 years of a child’s life, that’s great. Then you can pay for some of the rest using your current income while your child is in college and the final portion with a loan. Ron has written about what he calls the McKinley Rule here and here.
Didn’t save a cent? Don’t despair. If the cost is $100,000 for four years at a public school, a student can usually borrow up to $31,000 from the federal government. Working part-time during the school year and full-time during the summer can easily yield an additional $20,000 over four years. Then the parent or parents could take the rest, through belt-tightening; the day job; side job; borrowing; or some combination of those possibilities.
Starting at a community college is also a good option. Ron wrote about tactics for community college students here.
Financial Aid for International Students
Do all these changes mean that the actual financial aid for international students will be limited? — Anastasia Mikaelson, St. Petersburg, Russia
None of the decisions are expected to affect financial aid for students coming from outside the United States, which was already quite limited.
“I doubt there will be any impact on international student admissions because most colleges consider them revenue centers,” said Mark Kantrowitz, a student aid expert and the author of “How to Apply for More College Financial Aid.”
But it’s wise to learn as much as you can about a college’s individual policy on international students, review it statistics on How many it has confessed in the past and asks if it provides them with help. College websites often have this information, as well as resources for international students, including eduPASS and Education USA.
Only eight colleges that have need-blind admissions (which do not take into account a prospective student’s ability to pay) also meet the full financial need of international students. They are Amherst, Bowdoin, Dartmouth, Georgetown, Harvard, the Massachusetts Institute of Technology, Princeton and Yale, Mr. Kantrowitz said.
529 College Savings Plans
I am a parent of a toddler. I have long thought that a 529 was the best way to help pay for my child’s college. Then I learned from a parent of a college student that having one reduces the chances of financial aid, so it’s better to save that money in a retirement account and not report it to schools. Another parent of a college student then tells me they have a 529 for their child, but don’t tell the school to step up financial aid. What are the implications of following these two approaches: Bet on financial aid or be unethical? — California reader
There are many misconceptions about how 529 college savings plans will affect a prospective student’s eligibility for financial aid, but your initial guess was correct.
These accounts — which are run by states and allow money to grow tax-free and be withdrawn tax-free as long as the money is used to pay qualified expenses — are usually the best way to save for a child’s higher education. And they have minimal impact on federal financial aid eligibility. In the end, income matters far more than savings when the federal government calculates yours aid package, which uses information on your Free Application for Federal Student Aid, or FAFSA. (As for falsifying FAFSA information, beyond the obvious ethical considerations, there are potential fines and jail time.)
But as with anything related to personal finance, it’s complicated.
If the 529 is owned by the parent or the dependent student, it is considered the parent’s asset. This means that only a small percentage, or up to 5.64 percent of the account’s value, will be counted when calculating your financial aid through the FAFSA. For example, if a parent saved $30,000, the aid would only be reduced by as much as $1,692. That’s something, but it’s definitely not worth giving up your savings strategy.
If the 529 account is owned by a grandparent or other relative, it is not included in financial aid calculations. Once the money is withdrawn to pay for college, it still counts as nontaxable income reported on the annual FAFSA. Some good news: Grandparent withdrawals will no longer be reported on the next financial aid form, released in December for the 2024-25 academic year, financial aid and 529 experts said.
Then there is the question of retirement accounts. Some financial experts suggest putting at least some college savings into a Roth IRA, which isn’t considered for financial aid until you start taking money out. Once you do, withdrawals are counted as income — and that could hurt your eligibility for financial aid a few years down the road. If the student graduates in four years, Roth IRA distributions on or after Jan. 1 of the sophomore year in college will not affect aid eligibility, said Mr. Kantrowitz, the student aid expert.
How much will it cost (for a four-year college degree) each school year to enroll full-time in 2023, in addition to books and course-based devices/materials, eat meals on campus, live in a college-operated dormitory or apartment, cover. college-sponsored health insurance/medical expenses and transportation to and from college from home four times a year – as an independent student earning only an irregular income at the poverty level – regardless of race, etc.? – Joel, Maryland
Independent students Generally qualify for more federal financial aid than their dependent counterparts, but getting that status isn’t as simple as moving out of your parents’ home or no longer claiming you when they file their tax returns.
There are several qualifying factors, including being at least 24 years old; married; graduate student; or have dependents of their own.
Independent students can generally borrow more – up to $57,500 altogether for students, instead of $31,000 for most dependents — and are more likely to qualify for the maximum amount of Pell grants.
But figuring out the true cost varies by institution, although most students end up paying less than the sticker price. The best way to get those ratings is to visit a college net price calculator and run the numbers for yourself.
The Availability of Meritorious Assistance
What help options (outside of debt loans) are available to those families who earn “too much” to qualify for financial aid, yet don’t earn enough to comfortably pay out of pocket? — William, Dallas
We get where those scare quotes come from. You don’t believe that financial aid administrators think you can pay the full price.
In fact, those managers are very aware of what they call your “felt need.” That’s why they offer something called merit aid, which, at least in theory, is about what a child has done – and not about the money the family has.
How much merit aid could you get? It depends, and as Ron has written several times, it’s not always easy to predict. You can find hints about how schools publish it, however, on the so-called common data sets that colleges publish. Look at section H2A (that’s the code for merit aid) to understand how much schools give to people who don’t qualify for need-based aid — and the percentage of time they give out any discount at all.
Need-Blind vs. Need-Aware
I’m a rising high school senior, and I want to know how much your economic class and need for financial aid affect your odds of being accepted. – Quinn Patwardhan, Kensington, Md.
Schools can be need-blind, meaning they don’t consider financial need when deciding whether or not to admit you. They can also be need-conscious, meaning they might turn you away if they don’t have enough help to make it affordable.
Colleges don’t always say on their websites that they are aware of a need. Ron wrote about how schools communicate about these issues here. Both of them Muhlenberg College and Oberlin College has great (and humane) explainers about their processes.
Schools can also let you in but not provide a good aid package. In this case, you will have to find out if you are able and willing to use loans or some other strategy to fill the gap between the price fee to attend and the amount you can pay.
Now that the Supreme Court has struck down race-conscious admissions programs, schools with large financial aid budgets can tilt the odds in favor of people who can’t pay the full price. A handful of schools, like Berea College in Kentucky, be careful to admit only students who have, in Berea’s words, “limited resources.”
Are There Benefits to Out-of-State Schools?
Is it worth considering moving out of state, even though it will cost more? – Kathy Deligianis, Reston, Va.
Let’s start with the assumption that out-of-state schools will cost more. Some states have reciprocity agreements with other states that allow out-of-state students to pay in-state rates at public colleges and universities.
Private colleges offer the merit aid we discussed above, and, if you get a lot of it, an out-of-state private school might cost less than an in-state public one. But public institutions can and do play the merit aid game, too, especially for out-of-state applicants with grades and test scores that are above that institution’s average.
“There is an incentive for admissions and financial aid officers to sprinkle in merit aid so they can achieve the geographic diversity they want to achieve,” said. Shereem Herndon-Brownco-author of “The Black Family’s Guide to College Admissions.”
Schools in major athletic conferences often work especially hard at this. “ESPN is the greatest marketing tool for colleges that exists,” said Mr. Herndon-Brown. “But once they’ve got that interest, they have to dangle the carrot in front of the parents.”
As to whether an out-of-state school is worth the extra money it costs, that depends. Could your child learn more or gain access to a program that isn’t available closer to home? What kind of friends could your child make that may be similar or different in a beneficial way? And might a remote school’s reputation mean more to snobbish hiring managers in a particular industry or to gatekeepers at certain graduate schools?
The answers may be vague, but it helps to ask pointed questions at the beginning of the process.