Considerations when planning to pay for school, including school choice, employment options, accounting strategies, and the importance of borrowing wisely.
In this topic, you'll learn:
Student loans can make college possible for many families, but borrowing should be only one part of a broader strategy for paying for school. So what should you consider when developing your aid strategy?
School Choice
First, your choice of school can have major financial implications. Sometimes schools with higher published tuition may be more affordable than inexpensive schools - after you receive your aid package. Many students end up paying substantially less than the sticker price after completing the aid process.
Most colleges participating in federal student aid are required to provide a Net Price Calculator. This tool can estimate what students with financial circumstances similar to yours have paid after grants and scholarships.
Working While in School
Working modest hours can help students earn money, gain experience, and reduce borrowing without necessarily hurting academic performance. Heavier work schedules - particularly more than about 20 hours per week for full-time students - have been associated with poorer academic outcomes. The right balance varies by student.
Determining the right balance of work, study, and debt is not always an easy decision, but it's a choice that can also be adjusted over time.
Borrowing in the Right Order
Before borrowing, look for grants and scholarships that don't have to be repaid, along with savings, income, and work-study opportunities. If borrowing is necessary, compare federal student loans before turning to private loans. Federal loans generally offer fixed interest rates and borrower protections that may not be available with private loans. And don't automatically borrow the maximum amount offered - you can usually accept less.
Accounting Strategies
Financial decisions made before college can sometimes affect aid eligibility because the FAFSA treats different types of income and assets differently. For example, assets belonging to a dependent student may affect federal aid eligibility differently than assets reported by a parent. Education savings accounts also have specific reporting rules.
Because financial aid formulas and individual circumstances can vary, families considering significant financial changes primarily to increase aid eligibility should consult the college's financial aid office or a qualified financial professional.
The Takeaway
One important point to remember is that even the best aid strategy is useless if the student does not succeed in school. For example, working too many hours trying to minimize debt may cause grades to suffer. Some students even leave school before graduation, a truly worst-case scenario in which education loans must be repaid without the increased earning power of a degree. College can be a life-changing experience in a positive way if completed successfully and with a debt level that's not a burden.
First Credit Union is Arizona local not-for-profit financial cooperative. We’re owned by our members, not stockholders. First Credit Union was established in Arizona in 1929 and today is based in Chandler, AZ. We care about our members. We show it by offering member-priced products and services, but also by offering free tax preparation, free financial education, and free money management tools to help members improve their financial condition. Simply put, we exist to serve our members :-)
