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College Crunch | Paying for that crucial four-year degreeŚwith savings, financial aid, and scholarships. | By Susan E. Davis

Like parents around the country, I’ve been diligently saving for my kids’ college tuitions since soon after they were born. But when my daughter started her freshman year of high school last September, I was struck by a new wave of anxiety. Suddenly we have just four years to stretch that nest egg enough to cover a full college education, complete with room, board, textbooks, and possibly airline travel.

And it seems impossible. University of California tuitions have reached $30,000 per year—nearly as much as out-of-state tuitions at other state universities. Private colleges, with tuitions reaching $40,000, $50,000, even $60,000 per year, seem totally out of reach. What’s more, the Great Recession reduced my kids’ college savings accounts by a good third. But college, alas, is no longer some distant place my daughter will go in some magical future—it’s just around the corner.

I’m not the only one going through this sudden, intense anxiety. All around the country parents are getting caught between the soaring price of tuition (U.C. Berkeley’s tuition has risen by 70 percent since 2009) and the breathtaking drop in the worth of their own assets. Adding to the mountain of worry: Many private colleges have seen their endowments shrink and most colleges have more people applying for aid.

So what’s a parent with a wanna-be-college-bound high-schooler to do?

First, hold onto your socks. And then get to work. “Parents are definitely getting more anxious,” says Gerna Benz, a financial consultant with Oakland-based Bay Area College Planning Specialists. “The elephant in the room is that the anxiety levels could be sharply reduced if they would just start planning for this huge capital outlay a little sooner.”

Calculating the price

Your very first task is to get a firm handle on the costs of the colleges to which your child is applying, as well as how much you might be expected to pay toward that. These days every college and university in the country has an online “net price calculator” on its website. (If you can’t find it, try this US News & World Report shortcut (usnews.com/education/best-colleges/features/net-price-calculator). These calculators take information about your income, assets, and liabilities and give back your “expected parent contribution.”

If you don’t make a lot of money, your contribution might be very low. If you are middle income to high income, you may find you’re expected to pay $10,000, $20,000, $30,000, or even $40,000 per year. Clearly, this is information you need to get while your child is applying, so that she includes colleges you can actually afford on her college list.

To get even more information, check out the financial aid web page for colleges your child is considering—or call up the school’s financial aid office. “You can ask, ‘What percentage of students get financial aid and how much money do you offer?’” Benz says. “There are a ton of options out there.”

By the way, this exercise takes time. It’s not always easy to find a college’s tuition on its website (it’s often listed by credit, not annual cost) and the net price calculator requires a fair amount of information. Start this process early so you can do it well.

Financial aid

Once you know the costs, it’s time to apply for financial aid. Your first step is to fill out the Free Application for Federal Student Aid (available Jan. 1). Additionally, many colleges also require the College Scholarship Service Profile (available Oct. 1). Some college planners recommend filling out the financial aid applications even if you think your family income is too high, because your student might qualify for aid. And it’s crucial that you fill out these forms correctly. “Parents get anxious; they don’t understand what the questions are asking; and they make errors,” says Frances Fee, a college financial aid consultant based in Oakland. “In fact, I’ve never seen a FAFSA filled out by a parent that didn’t have mistakes on it. Sometimes these mistakes are not in a parent’s favor and needed aid is not awarded.”

All the colleges to which your child applies will use the same form (i.e., you don’t have to fill it out for each college). If your child is accepted, you’ll receive a financial aid award letter at the same time you receive the acceptance letter. That financial aid may consist of:

• Need-based scholarships: Schools that are “need-blind” will accept a student regardless of family income and make up the difference. E.g., Harvard and Yale don’t require students of families earning less than $60,000 a year to pay any tuition. A family that earns $60,000 to $120,000 may pay as little as 10 percent of the tuition. Other colleges will pay a portion of the tuition, depending on your income and assets. The bad news is that there may be quite a big gap between what the college thinks you can contribute and what you actually can.

This is especially true in the Bay Area, where the cost of living necessitates higher income. “It’s really a double whammy,” Benz says. “It costs more to live here, but the more money you make, the more financial aid you lose.”

The good news? “Your child doesn’t have to go to Harvard,” Benz says. “There are jewels in the rough that can provide a lot of aid. As long as their portfolios and endowments didn’t take a big hit, they can help you. And that means it can be cheaper to go to a $65,000 school than it is to go to a $25,000 school.”

Other kinds of scholarships

Even if your income is too high for need-based aid (and again, the threshold can vary by the school), your child might apply for other types of scholarships, including:

• Athletic scholarships: Some colleges offer full—or, more often, partial—scholarships to athletes. Note: Division I Ivy League schools and Division III colleges don’t offer athletic scholarships and nationally, only two percent of all high school athletes receive scholarships.

• Merit-based scholarships: Most colleges offer some scholarships to outstanding students. The primary exceptions are the eight Ivy League colleges, which offer no merit-based scholarships, although they tend to have a higher ceiling on need. Check out MeritAid.com, a comprehensive directory of U.S. colleges and their scholarships, for more info. Note: Top private schools want top students and will often offer more financial incentives than public universities.

• Loans: You can get loans from private organizations (e.g., credit unions), colleges, state governments, and the federal government. In general, you’ll find the lowest interest rate with federal programs, like Stafford and Perkins. Just remember, if you borrow money to pay for college, you’ll pay more when you pay it back with interest.

• Work-study: These are part-time jobs, most often at the college itself, local nonprofits, or government agencies, which provide students with money to be used toward college expenses. Federal work study is based on financial need; non-federal work study is not.

Here’s more good news: Public universities do offer aid—two-thirds of undergraduates at U.C. Berkeley, for instance, receive aid, says Rachelle Feldman, assistant vice chancellor and director of the financial aid and scholarship office at the school. And in 2012, the school launched an innovative Middle Class Access program for families whose gross income ranges from $80,000 to $140,000 annually. That plan caps the contribution that parents make at 15 percent of their total income. Programs like that make Cal “financially manageable for most California families,” Feldman notes.

When to get started

College finance planners tell nightmare stories about parents who didn’t start considering financial aid until their child had been accepted into her dream school—and then they suddenly realized they had: a) not done their research; and b) couldn’t possibly afford said college of dreams. To avoid this pitfall, Fee recommends that people begin understanding the financial aid process in the spring of their child’s sophomore year or the fall of their junior year. This is still before the “base year” for financial aid (i.e., the tax year used by colleges and FAFSA analysts to determine the aid for which you’re eligible), which runs from Jan. 1 of your child’s junior year to Dec. 31 of your child’s senior year.

“But most families begin the financial aid process in the spring of the student’s junior year,” she adds. “That’s when students are compiling their college lists. It’s very useful to know how financial aid is going to work at different schools—for instance, if the parents are separated or divorced, will the schools require income and asset information from one parent or both? Also, for same-sex parents, the FAFSA requires information from only one parent but the CSS Profile requires information from both legal parents. Knowing these kinds of things ahead of time can be useful as the student compiles his or her college list.”

Most high schools, by the way, offer seminars for parents looking into financial aid options and most college counselors will meet with you and your child to answer any questions you may have. These are great resources, as they may already know your child and the types of financial aid recent graduates have received.

Appealing the decision

In some cases, parents choose to appeal the financial aid offer, most often if the family’s financial circumstances have changed or they think the college made an error. In one case, for instance, a prospective applicant received offers of between zero and $35,000 in grant aid from eight top-tier schools. When the family appealed the school that offered nothing, the award was reconsidered, and the school ended up offering nearly $30,000. Despite such stories, Fee says, “the emphasis should be on completing the application correctly and writing a good letter up front. If you do everything right the first time around, appeals might not be necessary.”

Doing your college financing homework early can also make parents calmer. In my own case, for instance, looking at the annual cost of a college education still makes my heart race. But knowing there are options out there makes me feel a little more able to take on this next challenge in my daughter’s education.

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Susan E. Davis is an Alameda-based writer, editor, and senior editor. Her small, private, four-year college cost $5,000 per year in 1980.

CREATIVE SOLUTIONS
• Do two years at a community college then transfer to a four-year college.
• Live at home instead of on campus to save on room and board.
• Use home equity loans.
• Take enough Advanced Placement classes in high school (or college courses in the summer) to potentially graduate from college early.
• Apply to schools in the Western Undergraduate Exchange. This program allows California students to go to select state and community colleges in Western states and pay only 150 percent of the resident tuition rate of those states.

CHASING TUITION
Fastweb, provides one-stop shopping for both colleges and financing information; fastweb.com.
U.S. News & World Report’s “Paying for College,” includes information on how financial aid works and how to save money on tuition; usnews.com/education/best-colleges/paying-for-college.
College Board, administers the SATs, but also includes net price calculators, general info on financial aid, and a huge listing of scholarships; collegeboard.org.
FinAid, a comprehensive source for information on loans, savings, scholarships, and other ways of paying for college; finaid.org.
StudentAid.gov, run by the federal Department of Education, also provides a good overview on how financial aid works; studentaid.ed.gov.
Western Undergraduate Exchange; wiche.edu/wue.
Bay Area College Planning Specialists; (510) 686-7979 or baycollegeplanners.com.

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Nest egg angst: Parents today have their work cut out for them when it comes to sending their kids to college. Photo by Barbara Reddoch.