Ask the Expert, College Planning, Finances

ASK THE EXPERT: College Financial Planning, Part 1

For our newest blog series, we wanted to look at college planning and financial aid, as the student debt crisis has most certainly been a hot topic in the media recently.  For this series, we wanted to know exactly what students need to understand when it comes to financial aid, college financial planning, loan repayment, and student debt.  It just seems so complicated!

For the first installment in the “Ask the Expert:  College Financial Planning” series, we wanted to know what students should be concerned about when it comes to finances and applying for college.  To find out more, we spoke with Mark Kantrowitz, a noted financial aid and college planning author and publisher of FinAid and FastWeb, two resources for students looking to find out more about financial aid options available to them.

Kantrowitz tells us that students should ideally start looking at financial aid options as early as possible.  Often many students start looking their senior year, however, many of the deadlines have already passed.  Kantrowitz says that students looking to get scholarships should be planning for deadlines as early as junior year (if not earlier), so that they can get their applications in for those scholarships with deadlines in the fall of the their senior year.  He explains students should start considering financial aid as early as possible, as this increases the number of scholarships available to them, including those that they may earn in earlier grades.

According to Kantrowitz, when it comes to examining their options, they should weigh the cost of financial aid.  For students, he says, saving is always the better option.  “Every dollar you save is a dollar less that you’re going to have to borrow and every dollar you borrow, will cost you about $2 by the time you pay back the debt.”  It is simply the more affordable options, because when you save, you earn interest and when you borrow, you will pay interest. He gives us the example that, “If you were to save $200 per month for 10 years at 6.8% interest, you’d accumulate about $34,400.  If instead you were to borrow and pay back over 10 years at 6.8% interest, you’d pay $396/month.”  That would roughly double what one would pay if they were to save money instead.

Kantrowitz explains that students should also be aware of the actual cost of college.  He says that students should utilize a net price for college, which is the difference between the cost of attendance and just grants and scholarships.  “Think of it as a discounted sticker price.”  He explains that using this figure is a better basis for evaluating the cost of college rather than utilizing other cost evaluations.  Especially when it comes to the net price figures that schools will often provide on their websites.  Kantrowitz explains that these numbers will often include financial aid packages and loans, that do not actually lower the cost, but will rather increase the cost.

Kantrowitz also urges students to use caution with net price calculators that universities are now required to provide on their websites.  He explains that since October 2011 schools have mandated to host a calculator, however, he says that they really should only be used to determine a ballpark figure for net price.

According to Kantrowitz, there are a couple of major issues with these calculators.  The first major concern with these calculators is the number of questions the calculator has.  He says that much of the accuracy of these calculators is dependent upon the number of questions that they ask; while the standard calculator provided by the National Center for Education Statistics (NCES) contains approximately 10 questions, other calculators such as the one provided by the College Board, contain more questions.  The more questions a calculator has, the more accurate the calculator will be, he explains.  While these calculators are will mean more work for the user, they will produce much more accurate results.

The second concern Kantrowitz points out is that the age of data will play into the accuracy of the calculator.  He explains that calculators like those provided by NCES contain data that is approximately 2 years old, while those like the one provided by the College Board are current, and are more up-to-date.  In either case, Kantrowitz explains, one should use caution with these calculators and should not exclude any colleges on the sole basis of the figures provided by a net price calculator.

The last major concern Kantrowitz points to relates to the financial aid award letter.  He explains that students should be careful when they receive their financial award letter that they understand the characterization of the different awards and understand which award they were given.  “I’ve had families come to me thinking that they’re getting a free ride from a college, and when I look at the financial aid award letter I see $5,000 in student loans and $20,000 in parent loans.  That’s far from a free ride.”  Students should really do their homework when it comes to the different classifications of financial aid, so they know that when they receive a grant, they know which grant they have received and what this implies.

Overall, Kantrowitz urges students to start considering college financial aid early and often, and to do their homework when it comes to understanding the different options available to them.  He explains that students and their families should always exercise caution when it comes to financial aid and to make financial aid decisions that work best for them.

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College Planning

The “Going-Off-To-College” Essentials

Going off to college is, for many students, the first time you’ve lived away from home.  More often than not, you’ll probably be used to the comforts of home, where everything you could need is right at your fingertips.  That is why many are often confused as to what they actually have to bring when they start packing for college (so don’t worry, you’re not alone).

There’s a lot of considerations when it comes to what exactly you’ll be needing for the next nine months, so where do you start?  Well, while a lot universities will give you a basic checklist of what you’ll need, we put together a list of some of the things your school may include, and also some things they may not.

  • Microwave.  Most schools will allow you to have a microwave in your room.  You’ll definitely want to coordinate with your roommate beforehand to see who will bring what, but a microwave will be your best friend for those late night cram sessions.
  • Refrigerator.  Another dorm essential that you may want to coordinate on with your roommate.
  • Alarm clock.  In an article we read by Naomi Rockler-Gladen at Suite101.com, you will want to choose an alarm clock that is loud enough to wake you up.  You may also want to choose a battery-operated alarm clock, so if the power goes out in your building, you will still wake up in time for class.
  • Telephone.  Although a lot of students don’t go anywhere without their cell phone nowadays, you will still want to make sure that you have a cell phone with you when you move.  Rockler-Gladen says that you may also want to make sure that you have a plan that will fit your needs when it comes to making those daily phone calls to your friend in California.
  • Computer.  While a computer is not an absolute essential for college, it will make your life a lot simpler.  You’ll want to shop around for the computer that suits you best.  For example, if you’re trying to decide between a desktop and a laptop, you may want to consider where you want to do your studying.  Would you want to study in the library?  Would you want to bring your computer to class?  You’ll want to ask yourself questions like this to make the right decision for you.
  • Bathrobe.  If you’ll be living in a dorm with a bathroom at the end of the hallway, you will especially want to consider getting a bathrobe for those long walks back to your room.  Even if the bathroom is right next to your room, you’ll want to be sure that you won’t be giving your roommate a show.
  • Flip flops for the shower.  Trust us on this one:  you have no idea what is on that floor.
  • Shower caddy.  This makes those trips back and forth from the shower easier.  Pick a container that you can carry everything you’ll need in it, like shampoo, conditioner, soap, etc.  You may also want to choose one that is waterproof so that you can take it right in the shower with you.
  • Basic hygiene materials.  Although it seems obvious, you’d be surprised what you’ll forget.  You want to be sure to bring shampoo, conditioner, soap, toothpaste, mouthwash, etc.  Whatever you use on a regular to keep you clean you’ll want to bring with you.
  • Linens.  You may want to bring two sets of bed linens just in case one in is in the laundry.  You’ll also want to bring extra towels so that you don’t run into the same problem.
  • Cleaning materials.  Your best friend will be the disinfectant.
  • Medications and first aid.  You obviously will want to bring any medications you take on a daily basis.  But you also want to bring things like band aids, antibacterial ointment, antacids, cotton balls, etc.
  • Basic school supplies.  You’ll definitely need pens and pencils, but don’t forget things like printer paper, staplers, pencil sharpeners, and extra staples.  You may also want to get extra printer ink, in case you run out in the middle of printing out a paper the night before it’s due.
  • Good backpack.  Rockler-Gladen suggests that you get a backpack that you’ll be able to carry all your books and your essentials in.  If you’re bringing your computer to class, you may want to ensure that it will fit in your backpack.
  • Laundry materials.  You want to get laundry detergent, as well as a hamper and/or laundry basket to carry your clothes back and forth from the laundry room.
  • Rain jackets.  Trust us on this:  you’ll want a rain jacket with a hood.  You may also want to get a waterproof winter jacket if you’ll be somewhere where it snows.  We promise you when we say that you want to be prepared for all types of weather.  Remember that at most schools you’re classes will be in different buildings around campus.  That means that when it rains, you’ll have to walk through that.
  • Rain boots.  Again, you have to be prepared for everything.
  • Umbrella.  This is for the days where you could get away with just an umbrella, i.e. there isn’t wind accompanied with the rain.
  • Snow boots with treads.  Seems a little dorky, but trust us that you’ll need them.  If you’ll be in a place where it snows, you will want to make sure you don’t fall on your face walking to class.
  • Flashlight.  In case the lights go out or you lose something under your bed, you’ll want one of these handy.
  • Decor.  You’ll want to decorate your half of the room to remind you of home.  Don’t forget about those pictures that will get you through those long nights of studying.
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