One of the first steps experts recommend to families concerned about how to pay for college is to complete the Free Application for Federal Student Aid, called the FAFSA, because it opens the door to a range of financial aid options. But nearly one-third of families of college students did not complete the form for 2019-2020, potentially missing out on funding, according to Sallie Mae’s How America Pays For College 2020 study.
The economic impact of the coronavirus pandemic in the U.S. may lead to an even greater strain among families to afford the cost of college, as many Americans are unemployed or face medical costs associated with the virus.
On average, U.S. families spent $30,017 on college costs in academic year 2019-2020, the Sallie Mae report found. To ease the burden of paying for college, families should start by completing the FAFSA, which opens on Oct. 1 each year. But in addition to this important first step, there are a few other overlooked ways to pay for college and some new options created in response to the pandemic that families should consider:
— 529 college savings plan
— Scholarships and grants
— Emergency grants
— Financial aid appeals
— Student and parent borrowing
— Student income and savings
529 College Savings Plan
Parent income and savings covered the largest portion of total college costs, about 44% or $13,072 on average, according to the annual Sallie Mae study, which surveyed 1,000 American undergraduate students and nearly 1,000 parents of undergrads in spring 2020.
College 529 savings plans, which offer an opportunity for families to grow their savings tax-free as long as the money is spent on qualified educational expenses, were used to pay a greater percentage of college costs than other savings options like non-college savings accounts and retirement accounts.
“More than a third of parents (37%) used a college savings account, like a 529, to help pay for college last year,” Rick Castellano, a Sallie Mae spokesperson, wrote in an email. “This is up from 21% in 2018-19,” he says. “While we’re happy to see the positive trend, there’s still roughly two-thirds of families who aren’t taking advantage of these plans.”
Data from the study shows families with a higher income covered a higher percent of college costs using a college savings plan like a 529, and white families on average covered more college costs using such plans than Black and Hispanic families did.
Scholarships and Grants
In 2019-2020, college students received an average of $7,626 in scholarships and grants to cover about 25% of the total cost of college, according to the Sallie Mae study.
Students who complete the FAFSA are considered for state and institutional scholarships as well as the federal Pell Grant, a form of financial aid aimed at the lowest-income families and that does not have to be repaid. Additionally, families can look for scholarships at local nonprofits and other organizations, and students can seek out local scholarships, which are typically smaller in size but less competitive than national scholarships.
“Look at whether or not the mother or father’s employer has a benefit around tuition or a scholarship for students,” says Stephanie Klein Wassink, founder of Winning Applications, a Connecticut-based educational consulting company. “Or check at an organization their parents belong to, like the Rotary Club or some type of community-based organization.”
Many colleges are offering emergency grants to students in response to the spread of COVID-19, the disease caused by the novel coronavirus. Some of these are federally funded by the Coronavirus Aid, Relief and Economic Security Act, or CARES Act. More money may come in the future to support students struggling in the wake of the pandemic.
“There’s work in progress right now, today, about another package similar to the CARES Act that would include higher education emergency relief funds. What occurred in the spring will very likely occur in the fall,” says Bob Collins, vice president of financial aid at Western Governors University in Utah. “The amount of funding may be different, but I fully anticipate that because it’s bicameral, bipartisan, I’m sure it will be included if and when we get the next relief package from Congress.”
Financial Aid Appeals
The FAFSA uses “prior prior year” information to determine a family’s financial need. For example, the 2021-2022 FAFSA that students can file beginning in October will be based on 2019 federal tax returns. However, families who have had a recent change in their financial situation that would not be reflected in their 2019 financial information can request a financial aid appeal, sometimes called a professional judgment, from a college.
Because of the coronavirus pandemic, Collins says, “It’s a whole different economic condition today. If you got laid off, took a reduction in pay, your situation has changed. There will be an increase in appeals, in the professional judgment. Colleges have to recognize extenuating circumstances.”
Student and Parent Borrowing
On average in 2019-2020, student borrowing paid for $4,043 of total college costs and parent borrowing paid for $2,538 — together, 21% of the total cost of college, according to the Sallie Mae study.
Experts urge families to borrow only what they need, never accepting the maximum amount simply because it is offered. Students can borrow federal loans and explore loans offered by nonprofits or private banks.
“Any money that’s saved is money that you don’t have to borrow,” says Bob Cole, president of Private College 529 Plan. “There really aren’t many good alternatives to student debt than saving.” However, he says, “I don’t think student debt is bad in some ways because it really does provide some skin in the game for both the family and the kids, but minimizing that as much as possible is a priority.”
Student Income and Savings
Getting a part-time job may have been a strong strategy to pay for college 20 years ago, but since college costs have increased so dramatically in that time, student income and savings only covered on average 8% — about $2,303 — of a student’s college costs in 2019-2020, according to the Sallie Mae study.
Still, every penny toward college counts, so a part-time or summer job may help make costs more manageable.
Some lesser-known opportunities to make extra money as a student might include getting a job at a fast-food chain like Chipotle that includes tuition reimbursement benefits, picking up some freelance work or working to monetize social media through platforms like YouTube.
Trying to fund your education? Get tips and more in the U.S. News Paying for College center.
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How to Pay for College Using These Overlooked Strategies originally appeared on usnews.com