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Financing Education 101

If college or career training is in your future, you’re going to need to educate yourself on the costs of and paying for that phase of your life. This crash course in Financing Education can help you learn more about affording college or career training. College financial aid has also changed to include financing and benefits programs for those wanting to attend trade or technical schools or community colleges.

Applying for aid

There are two different ways to get free money for college and career training: federal funds and scholarship. And if you want to get out of college without getting too far in debt, you’ll want to exhaust every means to find free money.

There are plenty of free online resources to find scholarships so make sure you spend time, not money, to find financial aid. Also check with school counselors, business and civic organizations, and of course, your college’s financial aid office during your scholarship search.

File for federal aid

Most college financial aid offices will recommend that you file the FAFSA – Free Application for Federal Student Aid – even if you don’t think you’ll qualify for aid. Sometimes being rejected for federal aid is a prerequisite to getting other grants and scholarship from an institution. If you applied for financial aid the previous year, you might qualify for a Renewal FAFSA, which has fewer questions and pre-filled information fields. Here are some other tips:

  • The FAFSA becomes available each year on Jan. 1, so complete it as soon as possible because funds are limited at many schools. It’s much faster to complete the application online. You can even save your application and return to complete it within a 45-day time period.
  • Depending on your family’s situation, eligibility can change from year to year.
  • The college you attend may have additional forms or earlier submission deadlines for aid so contact the college’s financial aid representatives.
  • If you have any questions, call 1-800-4-FED-AID. 

Be sure to avoid these five common FAFSA mistakes

  • Do not leave a field blank. Use a zero if the question doesn’t apply.
  • Report all required sources of untaxed income.
  • Use the 1040 federal tax return for reporting income and taxes paid, not the W-2.
  • Include yourself in household size, even if you didn't live there the previous year.
  • Sign the application. If you file as a dependent, make sure your parents sign too.

How much will it cost

With tuition and fees often changing from year to year, projecting the costs of a future college education can be tough. Because of a federal mandate, however, every college and university now must have an online net price calculator that will provide you with an estimate -- based on current costs and financial aid data -- of the cost of one year of a first-year, first time undergraduate students.

To find the calculator on a college’s website, use keywords such as estimator or calculator since not all sites are using the exact same label for their online net price calculator. Some call them financial costs estimator, for example.

At www.collegeportraits.org, you can access the net price calculator of more than 300 public U.S. universities. The site, a cooperative project between two nonprofit organizations, even offers comparison data on the student body, student success rates and other such stats and information.

Learn the lingo

Wonder what the difference is between a loan and a grant? Here’s a quick look at the various terms you’ll come across to fund your college education or career training.

FAFSA – Most college financial aid offices will suggest that you file a FAFSA – the Free Application for Federal Student Aid – even if you don’t think you’ll qualify for aid. Sometimes being rejected for federal aid is a prerequisite to getting other grants and scholarship from an institution. You’ll more than likely need to complete this form for trade and technical school and community college applications, too.

Family contribution – the amount of money your parents can expect to contribute to your education. Two accounts that can help save toward that college education are a Coverdell Education Savings Account, available through financial institutions and investment advisors and offers tax benefits for education expenses, or a 529 savings plan, which are savings plans set up by every U.S. state treasurer’s office and the District of Columbia.

Grants – Financial aid that you don’t need to pay back

Loans – Money borrowed either from federally subsidized sources, such as the Stafford Loan program, or from financial institutions.

Scholarships – Another source of aid that doesn’t need to be paid back. These are often offered by various civic, community or nonprofit groups, as well as colleges and universities. Eligibility criteria can vary from financial need to studying a specific major to meeting a certain demographic.

Work-study jobs – These are jobs on campus or nonprofits for which the government provides subsidies to pay your salary. This is considered a form of financial aid.

Other costs

An often-overlooked part of the college education financial process is the application and visitation costs. It’s not unusual for colleges to charge an application fees. If you plan to apply at several colleges, that can increase your costs.

You should always plan to visit the campus of the university or college you plan to attend to determine if it will be the right fit. You’ll need to budget for costs related to that, such as transportation expenses, lodging and meals, and even time off from work.

Out-of-state tuition

If you plan to attend a university outside your state of residency, you may pay higher tuition and fees, than in-state, or resident, students, particularly if you are attending a state-funded public university.

If you are attending a public university within your region, you may qualify for discounted out-of-state tuition and fees through four regional, interstate compacts. For example, students in the states of Illinois, Indiana, Kansas, Michigan, Minnesota, Missouri, North Dakota and Wisconsin may qualify for reduced tuition when attending schools within the Midwestern Higher Education Compact.

Additional discounts may apply depending on a student’s major, and some schools may restrict which degree programs will qualify a student for a discount.

Paying for College

Pulling together the resources to pay for a college education can be a challenge. Ideally, it should be a long-term process, built upon years of saving for college and a combination of free money and – if everything else is exhausted – loans.

According to national studies, today’s average college student will acquire $24,000 worth of student loan debt by the time they graduate. But in today’s economy, an investment in a college education is one you can’t ignore – a college graduate tends to earn about $20,000 more than someone with a college degree, according to the College Board.

The U.S. Department of Education’s page, www.studentaid.ed.gov is a useful resource for providing more information about student aid and where to find it.

Saving for college

Setting up a specific savings account for a college education can help finance a college education. Two such available are a Coverdell Education Savings Account, available at Mid American Credit Union, and a state 529 savings plan. There are benefits and guidelines with each plan so review them closely to see if they are the right fit for your family.

A Coverdell ESA is a nondeductible account that features tax-free withdrawals for qualified expenses for a child’s education, from elementary to postsecondary. The beneficiary of the account must be under 18 years of age when the account is set up. Read more about these types of accounts at the IRS website and at the Mid American site.

Every state, as well as the District of Columbia, has a 529 savings plan – a kind of Roth IRA for education – that offers some tax benefits for saving for college, as well. In Kansas, the program is known as Learning Quest.

It’s best to contact a financial investment advisor,  such as the one available to you at Mid American, to talk about your needs and situation, such as the one available to you at Mid American, as well as a tax advisor about any tax incentives for college savings.

Search for scholarships

According to some sources, there is more than $3 billion available in scholarships. Here are just some of the free online resources that can help you land some free money: FastWeb.com, CollegeBoard.com, ScholarshipAmerica.org, and Scholarships.com.

Different scholarships will have different criteria, but many consider GPA, test scores, activities, and may require an essay, recommendations, and an interview. There are even some unusual requirements, such as being left-handed or making the best duct tape prom outfit. Award amounts can range from hundreds to thousands of dollars. Remember, you can accumulate as many scholarships as needed to fund your education.

Useful Links

U.S. Department of Education student aid page

FAFSA – the Federal Application for Federal Student Aid

FastWeb.com – scholarship source

CollegeBoard.com – scholarship source

ScholarshipAmerica.org – scholarship source

Scholarships.com - a scholarship source

College Portraits – offers links to the net price calculators of more than 300 U.S. universities and colleges

Midwestern Higher Education Compact – a compact of regional states offering reduced out-of-state tuition at participating universities

Western Interstate Commission on Higher Education - a compact of regional states offering reduced out-of-state tuition at participating universities

New England Regional Student Program - a compact of regional states offering reduced out-of-state tuition at participating universities

Academic Common Market - a compact of regional states offering reduced out-of-state tuition at participating universities

What about career training

Most trade and technical schools, along with community colleges, have financial aid options, too. Many will require that you fill out the FAFSA to start the process. Some may also point you in the direction of various federal- or state-sponsored programs that address job changes, career readjustments or training for a particular field.

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