Dear Financial Aid Finder,

Hi, I’m a high school senior with pretty good grades and a strong ACT test score. I want to go to college in the fall, but I have no idea how I’m going to pay for it. My parents don’t make very much as it is, plus neither of them went to college, so they aren’t terribly supportive of my wanting to go. In other words, I’m on my own. Other than applying for scholarships (my guidance counselor told me about a few), what else can I do?

Thanks,
Natalie in Minnesota

Thanks for your letter, Natalie! I love hearing from our readers. It sounds like you are pretty stressed about paying for college, which I can certainly understand. It’s a huge expense, and without any help from your parents, it probably seems overwhelming.

The first thing to remember is that you’re not alone. Many, many students are going solo with their college education. There are a multitude of different solutions — which, truthfully, all students should probably consider, whether or not their parents are helping to foot the bill. So, here are some things to think about:

• Complete the FAFSA (Free Application for Federal Student Aid — check out my FAFSA FAQs for more information). If you are independent (i.e. your parents can’t claim you on their tax return as a dependent), you absolutely MUST complete a FAFSA. Not only will you likely qualify for a Stafford loan, but you may also qualify for a Pell Grant and other federal grants as well. Even if you aren’t independent, you should still fill out your FAFSA — even with your parents’ income listed, you may still well qualify for federal aid. In fact, the cut-off for the Pell Grant is around $50,000 family income per year; and families earning $100,000+ still qualify for Perkins or Stafford loans. Plus, you will probably qualify for some amount of work-study, which is a great way to earn “spending money” for your day-to-day expenses while at school.

• Develop a personal relationship with your financial aid officer. Even if you don’t end up qualifying for a lot of federal, state or school aid, you can appeal directly to the financial aid officer. Given that you are paying for school entirely on your own, you have a strong case.

• Find a job that pays for school. Even in these tough economic times, there are companies out there that will pay for part or all of your tuition as a benefit of employment. I know that UPS does that nationally, and I’m sure there are many other companies as well. Check with the HR Department, if your job has one, to find out what benefits you might be entitled to.

• Get a part-time job. If your company won’t fund your schooling, look for a part-time job that has good pay and great flexibility. There are two schools of thought when it comes to working during school: The first says, finish school as fast as you can, even if you work less and take out more loans. Your earning power goes up significantly (doubled, and in some cases tripled) once your graduate, so paying back the loans will be much easier. The other school of thought says to take it slow and only go when you can pay cash. Working part-time may not cut it, so you might have to take a semester or a year off to earn extra cash.

• Consider living at home. If you have a good four-year (or two-year) college within driving distance, living at home can seriously reduce your annual bill. In fact, did you know that at most four-year in-state universities, room and board is more than double what tuition costs? If commuting isn’t an option, live on campus — it’s usually significantly cheaper than renting your own place. And consider becoming a Resident Advisor (RA). Your salary includes free housing and in some cases, board is provided, too.

• Expand your search for scholarships. The list you have from your guidance counselor is a good place to start, but it’s by no means the end of your path. Sign up for one of the free scholarship search engines (be sure to read my article on using free scholarship searches to avoid spamming and/or scammy sites). Check our my weekly Scholarship Friday post. Contact your place of worship and local community organizations. Ask at your parents’ place of work… and your own.

Hopefully these suggestions will get you started. Let us know how you’re doing! Good luck to you.

Do you have a question for the financial aid finder? Send me an email and I’ll see what I can do!

The bad news is that college will cost more in ‘10 than ever before. But there is some good news, too. Here’s what USNews had to say (and what I think about it).

1. It will be easier to apply for financial aid. I talked about the changes to the standard application for financial aid a few weeks ago. In short, the 2010 FAFSA is shorter, too. The biggest changes? Eliminating redundant questions and spitting out an instant Estimated Family Contribution.

2. It will be easier to figure out just how much college will cost. A new law means that colleges have until late 2011 to put new web-based calculators on their website that calculate true costs of attendance. A number of colleges are already launching their calculators, so look for it on your school’s website.

8 Money Saving Trends in Financial Aid

3. It will get easier to receive tax breaks for education. I’ve told you before about ways to save money on college through education tax credits and deductions. The new American Opportunity Tax Credit can be applied to tuition paid in 2010, with refunds up to $1K.

4. It will be easier — and more lucrative — to get Federal grants. Remember all those posts this summer about the student loan and Pell grant reform? Well, the Pell Grant is set to increase $200 (to $5,500) and the income cutoff is expected to go up as well.

5. It will get cheaper to attend college out of state. I’m including this, since it is on the USNews’ list, but frankly, I don’t see it as such a bonus. Basically colleges with relatively low rankings are going to be offering scholarships to attract out-of-state students. But I say: Why not focus your college search on better ranked, in-state colleges, where lower tuition means you may not even need scholarships?

6. It will be easier to get work-study jobs. Even if you don’t need a full-time job while in school, part-time gigs are great for paying things like those pesky bills for books and living expenses. The federal government is hip to this need, which is why they are increasing funding to allow for 200,000 more work-study jobs.

7. It will be easier and cheaper to take out student loans. As I’ve been reporting all year, changes to Stafford loans will see interest rates drop (from 5.6 percent to 4.5 percent); the easing of credit markets means that there will be more options for private student loans than there were last year. My two cents on that: Be sure you investigate the terms of any loan closely, and especially a private one.

8. It will be more affordable to repay your student loans. Remember that Income Based Repayment Plan I was telling you about last spring? Well, if you are facing limited income and seemingly limitless loan payments, you might qualify for some loan modification.

Those are the trends as USNews & World Report sees it (and as I see fit to comment on them!) But I want to know what you seeing out there on the ground? Are financial aid offices coming up with solutions for the growing needs of next year’s freshmen class? Are they working hard to keep hard working students in school, despite financial difficulties? Tell what you know!

The accrediting board determined that his heavy student loan burden disqualified him from being a lawyer. (Of course, without the right to practice, how that man is ever going to earn enough to pay off his nearly half a million dollars in loans is beyond me!) According to CBS News.com, this would-have-been lawyer is not the first to be denied a professional license because of too much debt. The same has happened to nurses, doctors and chiropractors.

Even if a high debt ratio doesn’t interfere with your professional accreditation, it may wreck havoc on your professional aspirations. At one point in time does the weight of your student loan repayment start to determine the conditions of your employment? Can’t take that job — it doesn’t pay enough!

Here’s what I mean. If you borrow, let’s say, 1/10th of what the law student above took out — just $40,000. At 6.8% interest and on a 10-year repayment plan, you would have to pay back $460.32 a month.  According to Wikipedia, the median income for families is just over $50,000. The breakdown for men’s and women’s salaries (yes, sexism is still alive and well!) is as follows:

The real median earnings of men who worked full time, year-round climbed between 2006 and 2007, from $43,460 to $45,113. For women, the corresponding increase was from $33,437 to $35,102.

A median-earning male would be spending approximately 12% of his monthly income on loan repayment — considered a reasonable debt-to-income ratio. At $35,000, you would be looking at more than 15%, a figure many experts consider too high.

Even with modest annual raises, you would still have to be able to maintain an above-average salary and a below-average household budget for a decade! So, how do you know when to say when?  (Read more about the real cost of paying back your student loans here).

Apply for student loans

I’m not trying to come out against student loans. I firmly believe that there is no better investment you can make than in yourself. And I fully aware of the skyrocketing cost of college (and the shrinking paycheck). Which is why I believe that something has to give. Students can’t afford the risk of maxing out their student loans. Surely $400K is way over-the-top, but $40K isn’t that far off the average. The College Board estimated in 2007 that the average student loan debt for undergraduate student was $22,700. The Association of American Medical Colleges estimates that doctors top out at $103,000+ in student loans.

So I’ve said my piece, but I’d love to hear what you think. How much student loan debt do you think is a “reasonable” amount? When do you say “when” to student loans?

Oh and by the way, it is possible to graduate from law school without massive student loan debt. And certainly without $400K.

Federal student loans have lower interest rates, more favorable terms (such as income-based loan repayment), don’t require a co-signer, and freeze your repayments and interest while you’re in school. All these factors, coupled with the instability of the private loan market starting last fall, make federal student loans a much better option than private student loans for students.

Congress concurs, which is why a House committee recently took up a bill to more closely regulate private student loans within its overhaul of banking regulations. If approved, the Consumer Financial Protection Agency Act of 2009 would create a new centralized federal agency to oversee various forms of consumer credit, including private student loans, credit cards and mortgages.

Meanwhile, the College Board issued its Trends in Student Aid Report last week, which shows that the amount of private student loans taken out in 2007-2008 dropped by more than 50 percent from the previous year. Last year, students privately borrowed $11 billion — representing just 13% of the total student loan market for that year. In 2006-2007, $22.8 billion was borrowed, or 25% of the total market.

Did everyone suddenly realize that federal loans were a better deal? Maybe, but there not necessarily, say the experts. There were a variety of factors that led to the scale-back, including:

• Tightening up of the financial markets — there are now fewer private lenders, with tighter restrictions on eligible borrowers

• More families are qualifying for federal student loans now, with so many out-of-work parents

• Congress increased the federal limits on federal student loans from $23K to $31K for ‘dependent’ undergrads last year — more money to borrow federally, making private loans less necessary

Are you seeing this trend in your family? Do you prefer federal student loans to private student loans?

A group of 15 senators is introducing a new bill to change this, providing immediate student loan debt relief to active-duty soldiers and members of the National Guard. According to a blog post from Senator Arlen Specter (R-PA), the bill

would prohibit interest from accruing on direct student loans, regardless of the date of origination, for all service members on active duty for up to 60 months. This would save the average service member between $1,183 and $1,479 over the course of a 12- to 15-month activation period.

Between this and the delays with tuition benefits from the new GI Bill, I am feeling rather frustrated for our nation’s soldiers and veterans. Are you a member of the military struggling with paying for your college tuition or your student loan payments? What do you think of the new Spector-sponsored bill?

The Student Aid and Fiscal Responsibility Act of 2009, now being debated by the Senate, will cease subsidies to private banks providing federal student loans.

Instead, the federal government will directly make loans to student, saving some $40 billion over 10 years. The Act will then redirect those savings to increase funding for the Pell Grant, expanding the number of eligible students and upping the maximum award to $5,550 per year.

Additional changes in the bill include:

• Expanding the Perkins Loan Program for low-income students
• Allocating $10 billion to Obama’s community college initiative, which aims to produce 5 million more 2-year college grads by 2020
• Give grants to states and institutions with innovative approaches to increase college retention and graduation rates
• Simplify the FAFSA form

The bill passed the House with overwhelming Democratic support, and just five Republican votes. Congressional leaders expect a similar partisan split in the Senate vote.

The number has been rising for many years, but this bump is the largest on record.

The deputy undersecretary of the Education Department, Robert Shireman, has said that this increase was “definitely above expectations” but was likely caused by the nation’s dire economic crisis.

According to the National Postsecondary Student Aid Study, two out of three college students borrow money to pay for college — and their debt load is growing significantly. In 2008-2009, the average debt load was $23,186; in 1997 the average amount was $13,172.

With a growing debt load and the highest unemployment rate since 1983, recent grads face a huge challenge: How to pay off mounting debt with the salary from a low-paying job… or no job at all. According to a number of research studies, this challenge has become so great, that many grads are postponing major life events — getting married, buying a home — indefinitely.

Read more in the Wall Street Journal about how college loan debt is impacting students once they graduate.

So what’s that we keep hearing about how all students are drowning in student loan debt? According to one of the College Board’s researchers, Sandy Baum:

People think students are drowning in debt, and there is a small proportion of students that borrow an exorbitant amount, but most students graduate with a manageable debt load.

Here are the stats:

• 34% of Bachelor’s degree graduates, and 41% of two-year degree holders had no debt upon graduation.

• The median student loan debt among those who did borrow was just under $20K, up 5% from the previous survey conducted five years ago.

• The total student debt for all non-graduate students (including those who had 0 debt) was $15,123, up 11% from 2003-2004.

• 10% of BA graduates (and 6% of those earning a two-year degree) had more than $40K in student loan debt upon graduation * Whether you borrow (and how much) seems to depend on the type of school you attend. 98% of student at a for-profit two-year college took out student loans, while only 38% of students at a public two-year college did.

• Borrowing also seems to be related to whether you go to school full-time or part-time (which makes sense, since most full-time students have less time to work). 50% of full-time students took out loans, including 19% who took out private student loans in addition to federal loans.

If you want to learn more about your options, be sure to check out the Financial Aid Finder’s articles on College Student Loans.

Known as the Student Aid and Fiscal Responsibility Act of 2009, the President’s plan would expand the number of students eligible for Pell Grants.

Currently 40 percent of American college students receive Pell Grant assistance. In addition, the bill would tie the dollar amount of the Pell Grant to the rate of inflation, allowing for a maximum increase from $5,550 next year to $6,900 by 2019.

In order to pay for the increase in Pell Grant funding, the bill would eliminate subsidies for federal student loans by private lenders such as Sallie Mae, replacing them with direct loans from the federal government. To learn more about the Student Aid and Fiscal Responsibility Act, check out this post from back in February when the President first announced his plan to overhaul student loans.

The average cost of text books is $1,000 per year, for example. And college fees aren’t cheap either.

One of the best ways to ensure that you graduate college without having to charge your way through is to apply for as many scholarships as possible. Whether you need an extra $2,000 or $20,000, the more scholarships you apply for, the better your chances of winning enough to cover your bills. Not sure where to find out about scholarships you might be qualified for? Here are five great ways to look:

1. Take advantage of free scholarship search engines.
Google scholarship search and you will end up with tens of thousands of links. How do you know which one to click on? The key is that these engines should be free. There is no such thing as a secret cache of scholarships, so don’t get sucked in by a website (or worse, a person cold calling you on the phone) promising access for a “low, low fee”. You should be able to search whenever you want, as often as you want, for free. For more on the most reputable search engines, check out our article on the top 5 Free Scholarship Search Engines.

2. Visit your college financial aid office.
Your college or university’s office of financial aid should have binders — or computer files — of scholarships, including private scholarships just for your school. Often endowed by alumni or university relations boards, these scholarships may target students from particular areas of the state or country, students majoring is specific subjects, or students of a certain ethnic, national or religious background. Set up an appointment early in the spring with a financial aid counselor and visit the office regularly for updated information.

3. Call you local community service organizations, religious groups, etc.
Open up the yellow pages and start making some phone calls to your local Kiwanis clubs, Chamber of Commerce, church, synagogue or mosque, and any other relevant community service group you can think of. These scholarships may not be big dollar, but your chances of winning them are much higher than with national scholarships. And five local scholarships worth $500 each still add up to $2,500 for school next year. Another tip: ask your boss or the company your parents work for if they sponsors any scholarships — and if they don’t, ask them if they would like to sponsor one now!

4. Meet with your academic advisor or department chair.
Just like your university may have special scholarships exclusively for enrolled students, your academic department may also have a limited number of opportunities for its students. While these gigs are fewer and farther between than the offerings on a free scholarship search engine, your odds of being ideally qualified for them are much better. You can learn more about student scholarships by college majors at the Financial Aid Finder’s newly expanded scholarship section. In the last week alone, we have added scholarships for biology majors, business major scholarships, scholarships for history majors, English major scholarships and more.

5. Read the Financial Aid Finder’s Friday Scholarship Announcement Post
If you are a regular reader of this blog, you probably already know about Scholarship Friday. That’s when I post about three scholarship opportunities with upcoming deadlines. I do my best to find national scholarships — so whether you are reading in Maine or California, you will still be eligible to apply. You should still be doing steps 1-4, but our Scholarship Friday is one very easy way to learn about great scholarship opportunities.

Have you found a great source for college scholarships? Tell us about it in the comments section!