The Supreme Court rulings striking down affirmative action programs and President Biden’s student loan 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 repayments are about to resume after being paused at the start of the pandemic, and Tara has put together a guide to getting started again. The Biden administration is planning to introduce a new income-driven repayment program that could lower monthly payments for millions of people. Tara has an FAQ for this as well.
And last week, the Biden administration vowed to try a new legal strategy for comprehensive student loan cancellation, using a different law than the one its failed effort relied on. Here is the article that our colleague Charlie Savage wrote 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 pay for college?! it is challenging. How can we let our 18-year-old get into six-figure debt? It seems irresponsible. , Janet Green, Burlington, Vt.
The most peaceful answer to this question is that Kevin McKinleyEau Claire, a financial planner in Wisconsin, explains: Think about it in chunks.
If you can save half, a third, or even a quarter of the cost of college in the first 18 years of a child’s life, that’s great. Then, when your child is in college, you can use your current income to pay some of the rest and the last part by borrowing. Ron wrote here and here about what he calls the McKinley Rule.
Haven’t saved a dime? Don’t get discouraged. If the cost for four years at a state school is $100,000, 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 could easily generate an additional $20,000 over four years. Then the parent or guardians can pick up the rest via belt-tightening; day work; an additional task; borrow; Or some combination of those possibilities.
Starting at a community college is also a good option. Ron wrote about strategy 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 Mickelson, St. Petersburg, Russia
Any decision is not 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, since most colleges consider them to be revenue centers,” said Mark Kantrowitz, student aid expert and author of “How to Appeal for More College Financial Aid.”
But it’s wise to review and learn as much as you can about a college’s individual policy on international students. statistics But How many? It has acknowledged in the past and asked whether it offers them assistance. College websites often have this information, as well as resources designed for international students. 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 the parent of a child. I’ve long thought that a 529 is the best way to help pay for my kid’s college. Then I learned from a college student’s parent that doing so reduces your 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 told me they have a 529 for their child, but haven’t asked the school to increase financial aid. What are the implications of following these two approaches: gambling on financial aid, or being unethical? , a reader from california
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 the states and allow money to grow and be withdrawn tax-free as long as the money is used to pay for qualified expenses — usually for the child’s higher education. Best way to save. And they have minimal impact on federal financial aid eligibility. Ultimately, income matters more than savings when the federal government counts you. support package, which is based on information from your Free Application for Federal Student Aid, or FAFSA. (As for providing false information on the FAFSA, beyond the obvious ethical considerations, there can be potential fines and prison sentences.)
But like anything related to personal finance, it’s complicated.
If the 529 is owned by a parent or dependent student, it is considered the parent’s property. 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 eligibility through the FAFSA. For example, if a parent has saved $30,000, aid would be reduced by only $1,692. It’s some talk, but it’s definitely not worth abandoning your savings strategy.
If the 529 account is owned by a grandparent or another relative, it is not included in the financial aid calculation. However, once the money is taken out to pay for college, it is counted as tax-free income reported on the annual FAFSA. Some good news: Financial aid and 529 experts said that grandparent withdrawals will no longer be reported on upcoming financial aid forms released in December for the 2024-25 academic year.
Then there’s the question of retirement accounts. Some financial experts suggest putting at least some college savings into a Roth IRA, which isn’t taken into account for financial aid purposes until you start taking money out. Once you do this, withdrawals are counted as income – and this may affect your eligibility for financial aid in the next few years. If the student will graduate in four years, distributions from Roth IRAs on or after January 1 of the sophomore year in college will not affect aid eligibility, said Mr. Kantrowitz, the student aid specialist.
independent status
How much will it cost each school year (for a four-year college degree) for full-time enrollment in 2023, plus books and course-based equipment/materials, on-campus meals, living in college-operated dorms or apartments, covering college -Sponsored health insurance/medical costs and transportation from home to college four times a year -As an independent student earning only irregular income at poverty level -regardless of caste etc? – Joel, Maryland
independent student Generally qualify for more federal financial aid than their dependent counterparts, but obtaining such status isn’t as simple as moving out of your parents’ home or not claiming them on you when filing a tax return. .
There are several qualifying factors, including being at least 24 years old; married; a graduate student; Or to be your own dependent.
Independent students can typically borrow more – up to $57,500 overall For undergraduates, most dependents are more likely to qualify for the maximum amount of Pell Grants – and not $31,000.
But finding the actual cost will vary by institution, although most students pay less than the sticker price. The best way to get those estimates is to visit a college net worth calculator And run the numbers for yourself.
availability of qualifying aid
What assistance options (besides borrower loans) are available to families who earn “too much” to qualify for financial aid, yet do not earn enough to comfortably pay out of pocket Are? – William, Dallas
We get where those scare quotes are coming from. You are in disbelief that the financial aid administrator thinks you can afford to pay full cost.
In fact, those administrators are acutely aware of what they call your “felt need”. That’s why they offer something called Merit Aid, which is, at least in theory, about what a child has achieved – and not about the amount of money the family has.
How much qualifying aid can you get? It depends, and as Ron has repeatedly written, it’s not always easy to predict. However, you can find indications of how schools approach this on the so-called common data sets that colleges publish. Check out section H2A (that’s the code for merit aid) to find out how much money schools give to people who don’t qualify for need-based aid — and what percentage of the time they give any kind of waiver. Are.
need-blind vs need-aware
I am a rising high school senior, and I would like to know how much your economic class and need for financial aid affect your chances of being admitted. – Quinn Patwardhan, Kensington, MD.
Schools may be need-blind, meaning they do not consider financial need when deciding whether or not to admit you. They may also be need-conscious, which means they may turn you away if they don’t have enough support to make it affordable.
Colleges don’t always say on their websites that they are need-aware. Ron writes here about how schools communicate about these issues. Both Muhlenberg College And Oberlin College There are excellent (and humane) explainers about their processes.
Schools may also admit you but will not offer a good aid package. In this case, you will need to find out whether you are able and willing to use a loan or some other strategy to fill the gap between the price quote and the amount you can pay to participate. .
Now that the Supreme Court has struck down race-conscious admissions programs, schools with larger financial aid budgets may lean toward those who can’t afford the full cost. a handful of schools, such as Berea College In Kentucky, try to admit only students who have, in the words of Beria, “limited resources”.
Are there any advantages to out-of-state schools?
Is it worth considering moving out of state even though it will cost more? – Cathy Deligianis, Reston, Va.
Let’s start with the assumption that out-of-state schools will cost more. some states have mutual covenants Along with other states that allow out-of-state students to pay at state rates at public colleges and universities.
Private colleges provide the merit aid we discussed above, and, if you get a lot of it, out-of-state private school can cost less than in-state public school. But public institutions can and do play a meritocracy aid game, especially for out-of-state applicants whose grades and test scores are above that institution’s average.
“There is an incentive for admissions and financial aid officers to sprinkle merit assistance in order to achieve the geographic diversity they seek to achieve,” he said. Sherim Herndon-Brownco-author ofThe Black Family’s Guide to College Admissions,
Schools in major athletic conferences often go especially hard at this. “ESPN is the biggest marketing tool for colleges,” Mr. Herndon-Brown said. “But once they’ve got an interest in them, they have to dangle the carrot in front of the parents.”
As far as whether or not the out-of-state school is worth any extra money, it depends. Can your child learn more or have access to a program that is not available closer to home? What kinds of friends can your child make that are similar or different in a beneficial way? And can the prestige of a distant school mean more than hiring managers in a particular industry or gatekeepers at certain graduate schools?
The answers may be vague, but asking clarifying questions early in the process helps.
