You can afford college. Here's how to find colleges with good financial aid.
The standardized tests have wrapped up, college tours are complete, and applications for college admissions and financial aid have been sent in. Acceptance letters are now rolling in, and you get your first big sigh of relief: You did it! You’re going to college!
It’s time to ask yourself what may be the biggest question of all: Which colleges can I afford? The answer will be different for every family, but there are a few key questions to keep in mind: How much student debt can I afford? Which colleges have good financial aid packages, covering scholarships, grants, and discounts? Based on your specific answers, you'll know which schools are realistic colleges for you.
Read on and learn the Edmit team’s recommendations for how students and families can understand which colleges are affordable, based on their own resources, goals, and budget.
What exactly is financial fit? It's simply another of way of looking at how much college you can afford. While the interpretation will differ in every family based on one’s unique resources and the specific net price of college, a college financial fit refers to schools where the cost of attendance aligns with a family’s finances, allocated higher education budget, and the school’s financial aid package. It ensures a minimal amount of college expenses paid for by student loans, personal savings, or other personal assets.
According to Jessica Velasco of JLV College Counseling, a good formula to determine financial fit is to look at the out-of-pocket cost (e.g., the direct cost of attendance minus the “free money” of scholarships, grants, and discounts). Velasco emphasizes a realistic approach to the leftover amount families are on the hook for: Is the out-of-pocket cost for a given school manageable—and sustainable over four years of college? If the answer to a given college or university is yes, that school is a good financial fit. If the answer is no, you may be able to go back to the school’s financial aid office to see if additional need-based aid or merit-based aid options are available. If they can’t offer you a better financial aid package, then unfortunately that particular school is not a good financial fit.
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To determine financial fit, compare your higher education budget with college affordability. Look at your finances, covering any money set aside for college, like a child college fund (e.g., 529 plans), as well as your expected family income over the next four years. Fill out the FAFSA and CSS/PROFILE. After your college applications have been turned in, speak with representatives at the financial aid offices to learn more about the different forms of student aid available.
Once financial aid awards have come in, take a look at the school’s true cost of attendance, covering tuition, room and board, textbooks, extracurriculars, and fees. Plan this out over four years. Then, factor in the financial aid package to see what’s left over. Do this exercise across every school that’s being considered, and compare results.
Additionally, consider your family’s unique circumstances. Will you have more than one student in college at the same time? If so, how will this impact your need-based aid and other financial aid awards? (If you’re not sure, a given school’s financial aid office can get into the specifics with you.) Do you expect your earnings and family income to fluctuate over the coming four years? Do you anticipate any major financial events in the near future, such as a real estate sale, stock market gain or loss, or retirement? Will students be expected to get a part-time job to offset the college cost? In answering these questions, you’re attempting to construct as realistic a picture as possible of your finances, so you won’t have any surprises later—and won’t have to take on more student loan debt than you can afford.
Many families want to know: How much student loan debt can I afford? Can you have more than one student loan? Again, the answers will depend on the college affordability and financial fit calculations specific to the family’s finances. Additionally, student loan types, amounts, and loan servicers will vary for both the students themselves and for parents. Should you go with federal student loan programs, or with private loans? Which repayment plans make sense for your plans after graduation? The personalized answer requires a critical look at available finances now, coupled with a realistic plan for future career, earnings, and repayment capabilities.
Debt tolerance, also known as financial risk tolerance, is knowing how much debt you can take on without jeopardizing your ability to make payments and not compromise your credit score (and a healthy financial future). It’s knowing your debt-to-income ratio (e.g., your monthly debt payments divided by your monthly gross income). Experts recommend having a debt-to-income ratio no higher than 43 percent.
On The Balance, financial advisor Jodi Orkun recommends borrowing only what you need to cover the cost of college, and once that’s determined, to carefully select the type of student loan and stick to a strict budget.
So, as you’re determining your debt tolerance, look at your finances, the colleges you compared, and how each will impact your debt-to-income ratio, both now and in the coming years. Based on your expected contributions and student loan debt amounts, which schools fit your budget?
In the aggregate, getting a four-year college degree has many benefits: The College Board reports that those who graduate from college receive higher earnings, enjoy greater job security and stability, and have higher retirement savings and access to health insurance than those who don’t go to college.
When looking at the ROI of a given college or university, families should look at the net price of college (factoring in student aid), work-study jobs and internship opportunities, employer interest in prospective majors, anticipated job prospects by major and geographic location, and entry-level salaries. Compare the cost of a four-year college to the anticipated post-graduate income and student loan repayment plans. Do the higher education and financial plans align? Will the debt-to-income ratio stay below 43 percent?
Remember, college affordability is a big question to tackle. It requires a detailed understanding of your current finances, and more than a little bit of predicting the future. It’s a lot of paperwork, including the FAFSA and CSS/PROFILE. If you’re overwhelmed, you’re not alone! Read our blog posts about how fellow parents and students are paying for college, and take heart that everyone is figuring this out together. While we can’t offer you a crystal ball here at Edmit, we can offer you a better glimpse of the true price of college. Knowledge is power: The more you understand your present situation, the better you can prepare for the future.
Founded by recognized university leaders, Edmit provides personalized insights and advice to help families find colleges that meet their academic goals and are within their financial means. Families that use Edmit make smarter college choices leading to less debt and better earnings outcomes, saving thousands of dollars.