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Figuring out the bottom line when it comes to the cost of your college education is definitely a stressful part of the process. With everything that goes into determining your financial aid package (your parents’ income, your earnings and your family’s net assets), it’s important to understand that merit aid – aid based on a student’s attributes (academics, athletics, extracurriculars, etc.) – is available to student regardless of their “need.” New federal rules are blurring the distinction between scholarships awarded on merit and grants awarded because of a student’s financial need – for instance, a growing number of colleges now award “need-based” aid to students from families earning six figures! Who would have thunk it?! So, we’ve compiled a few helpful tips to maximize your chances for merit aid and increase your overall financial aid package.

• Fill out the FAFSA. Federal rules have changed. College aid officials are now allowed to award need-based aid to students whose parents earned decent salaries last year but have recently been laid off, as well as make accommodations for a family’s unique circumstances, such as high medical bills.
• Apply to schools where you’d rank at the top. While your dream school might be an Ivy League, you should apply to at least a few colleges where your GPA would put you in the top 25 percent of the student body.
• Apply to schools that offer generous need-based aid. In the 2009-10 academic year, Louisiana College reported that 88 percent of students were receiving non-need based financial aid. Do the schools you’re considering boast the same kind of aid?
• Do the research. If you’re interested in a college, find out what it has to offer when it comes to merit aid. You might qualify for more awards than you think!
• Before making a final decision, compare net prices. Consider the cost of attendance in its entirety including tuition and fees, room and board, books and transportation. The school that offers the most in merit aid might not be the best choice; sometimes the college offering the largest merit scholarship might have the highest net price because its tuition is higher.
• Don’t be afraid to negotiate. Believe it or not, you have negotiating leverage when it comes to your merit aid package. If you have received admission letters from two or more universities and your first choice has a higher net price than your second choice, contact that institution! Some schools might be willing to match the merit aid offered, which would provide you the opportunity to attend your first choice school for less money!

Though it's a day off from school and work, New Year's Day is often seen as a day to get down to business.  While you're starting in on your New Year's resolutions, opening up a new calendar, and packing up the holiday decorations, there's one more thing that college students and college-bound high school students should consider doing.  The Department of Education starts accepting the 2009-2010 Free Application for Federal Student Aid (more commonly known as "FAFSA") on January 1.  State application deadlines start happening soon after, beginning with Connecticut's February 15 priority deadline.  So while you might not be starting school until August or September, you want to be applying for financial aid right now.

What You Need

In order to complete a FAFSA, you will need the following documents: 

 
• your social security card
 
• a driver's license if you have one
 
• bank statements and records of investments (if you have any)
 
• records of untaxed income (again, if you have any)
 
• your 2008 tax return and W2s
 
• all of the above for your parents if you are considered a dependent (to determine dependency status, check here)
 
• a PIN number to sign electronically (go to pin.ed.gov to get one)
 

If you do not have your tax information yet, and most likely you don't, you can use your 2007 tax information to estimate 2008.  That way, you have a FAFSA on file and once you've done your taxes for the new year, you'll be able to submit a correction online.  While that might seem like more work, it's the best recipe for maximizing your state and campus-based aid packages.  If things changed drastically for your family in 2008, apply for student financial aid with the information you have, then talk to your school's financial aid office to adjust your information accordingly.

Why You Should Apply

Completing a FAFSA is an important step in funding your education if you don't plan on paying for everything out-of-pocket.  The FAFSA is used by the Department of Education to determine eligibility for federal student financial aid for college.  This aid includes federal grant programs (such as the Pell Grant), federal work-study, and federal student loans.  It is also used by states to determine eligibility for their financial aid programs, such as state grants.  Colleges also use the FAFSA to determine eligibility for the need-based aid programs they administer.  Finally, many scholarship opportunities request FAFSA information as part of their application process.  Even if you think that you won't qualify for free money in the form of need-based college scholarships and grants, you should still apply.  At the minimum, the vast majority of students qualify for Stafford Loans, low-interest federal student loans that represent one of the best deals in borrowing for school.

Where To Get More Information

Start on the FAFSA homepage and go through the links under "Before Beginning a FAFSA" to get started, especially if this is your first time filing.  You'll find information about application deadlines, required documents, applying for a PIN, and other things you need to know about to begin.  If you don't want to wait until tomorrow, 2009-2010 worksheets are already available on fafsa.ed.gov.  The ambitious among us can even fill out a worksheet now, then copy the information into their FAFSA on the Web beginning tomorrow.

We also offer a wealth of resources on financial aid at Scholarships.com.  Check out the financial aid section on our Resources page for further reading.

While the focus for many students right now is planning for and paying for the next year of college, some students are still struggling with bills from the current or previous semester.  An e-mail survey by the American Association of Collegiate Registrars and Admissions Officers reports a perceived increase in unpaid tuition bills in the 2008-2009 academic year.  While being caught short on one semester's tuition can seem stressful enough, it can carry serious consequences for college students.

For students with the funds to easily cover tuition, either through family income, college savings plans, or financial aid awards, the figure on their bursar bill may be unpleasant, but it is soon forgotten.  However, carrying a bursar balance--in some cases, even a small one--can cut off your ability to register for classes, request transcripts, and even graduate, among other consequences.  Students who are unable to pay for a semester by the school's deadline may even find themselves dropped from their classes and kicked off campus.  These consequences can essentially derail your education, and many students who take a semester off from college to save money and pay off bills never go back to finish.

Luckily, as Kim Clark stresses in an article on the subject in U.S. News and World Report, universities are willing to work with students to keep them enrolled and get their bills paid, especially in the current economic climate.  Many schools are establishing or adding to emergency loan and grant funds to help students stay in school.  Federal student financial aid is also still available mid-term.  You can still complete the FAFSA for 2008-2009 anytime before June 30.  Even if you've already applied for the current year, talking to the financial aid office could still come through big time, especially if your circumstances have changed. Federal grants, as well as some campus-based programs may be available to students whose family contributions have significantly dipped.  While Clark's article emphasizes the surprising success networking and asking family for donations can bring, conducting a scholarship search may be a safer bet. Most importantly, be sure to stay in communication with your school. You may have to deal with three different offices on campus, but don't get discouraged.  The process may be more streamlined than you'd expect.  It is possible to stay enrolled regardless of the financial troubles you're facing.

If you're planning to enroll in a community college sometime in 2009, be sure to plan ahead.  While in the past, late registration may have resulted in students not getting a class or two they wanted, increased interest in two year schools may produce an even more pronounced effect.  Community colleges across the country are receiving more applications and admitting more students for the 2008-2009 academic year than ever before, with some institutions reporting percentage growths in the double digits.  Many schools are seeing enrollment increases so dramatic that they lack the money and space to adequately accommodate the students turning up on their doorsteps.

Community colleges and four-year state colleges are contending with state budget cuts, declining endowments, and less fruitful fundraising efforts in the face of the worst economic situation in decades.  Meanwhile, the cash-strapped and the frugal are flocking to the least expensive educational options available, which are community colleges.  Community colleges are also seeing an uptick in nontraditional students, as the unemployed return to school for job training and certification to get back to work.  All of this adds up to a situation where more students need seats in classes, college services, and student financial aid than ever before, yet fewer resources are available to accommodate these needs.

While schools are doing their best to find space, add courses and sections, and increase campus-based aid where possible, budgetary difficulties are an unfortunate reality.  The economic stimulus bill currently in the works in Congress may help relieve some of this stress, but students should still be aware of potential snags in their college plans.  If you plan to enroll in a community college this summer or fall, here are some steps to take:

1. Research costs and payment options now.  Do a scholarship search.  Many scholarships are available to community college students and some are awarded specifically to students at these institutions.
2. Apply for admission and financial aid as early as possible.  While most community colleges have rolling admission, students who wait until the last minute to get in may find classes full and aid exhausted.
3. Whether you're a new or returning student, register for classes as soon as you can and be sure to pay your bill on time, or early if possible.  If you get dropped or prevented from registering due to late payment, there's no guarantee a seat will still be there when you get your finances in place.
4. Complete the FAFSA soon, even if you're not sure if or when you'll start college in 2009. FAFSA applications are up this year, as are most varieties of financial aid applications.  This could mean a lengthier processing time, both at the Department of Education and in your college's financial aid office.  The FAFSA is worth doing--many community college students don't apply for aid, even though they qualify.  Applying is free and having one on file can't hurt, even if you don't go to school right away.
5. If your employer helps with tuition, find out beforehand whether they pay up front or reimburse you after the fact.  The earlier you know whether you need to come up with money on your own or the more warning they have before they need to pay, the better your chances are of being able to register on time.

Scholarships.com has become the first free scholarship search website to adopt the Scholarship Data Standard, a time-saving open data standard that allows college and college-bound students to apply for multiple scholarships by completing one form.

While many colleges and universities share a common application for admissions, currently students must apply separately for each scholarship offered by a different provider. This repetition can deter families from seeking out scholarships as an alternative to depleted college savings plans and expensive student loans. To make the scholarship application process more streamlined and accessible, the Scholarship Data Standard was developed by the Michael and Susan Dell Foundation and the National Scholarship Providers Association. Using the Scholarship Data Standard, a student can visit the Dell Scholars Program website, create an application file containing commonly requested information, save it to their computer and use it to quickly complete a later scholarship search on Scholarships.com.

The Scholarship Data Standard will allow students to find, review and apply for multiple scholarships with just a few clicks. Emily Hilleren, the Director of Content at Scholarships.com, stressed the convenience of the Scholarship Data Standard, saying, “When you have to fill in the same basic info again and again, it takes time away from doing the parts of the application that matter most. Students have lives and jobs and coursework, too, and we're hopeful the data standard will help them win scholarships without giving up all of that.”

Scholarships.com is currently the only scholarship search website to allow students to upload Scholarship Data Standard files. A student can visit Scholarships.com and use saved data to create a user account and search a database of 2.7 million scholarship and grant opportunities worth over $19 billion. As more scholarship providers adopt the Scholarship Data Standard, Scholarships.com users will be able to use their Scholarship Data Standard file to complete scholarship applications across the Web.

As we mentioned last month, financial aid application deadlines are fast approaching for the coming fall.  While students technically have until June 30, 2010 to complete a FAFSA on the Web for the 2009-2010 school year, state aid deadlines happen much sooner with some occurring as early as February--this February.  So if you're waiting to do your taxes first or just generally procrastinating on your application, check the deadlines below to make sure you don't miss out on state or campus-based aid programs. 

 
• Alabama:   Check with your financial aid administrator
 
• Alaska:  April 15, 2009
 
• American Samoa:  Check with your financial aid administrator (additional forms may be required)
 
• Arizona:  March 1, 2009
 
• Arkansas: 
   
  • For Academic Challenge - June 1, 2009
   
  • For Workforce Grant - check with your financial aid administrator
   
  • For Higher Education Opportunity Grant - June 1, 2009 (fall term); November 1, 2009 (spring term)
   
   
 
• California: 
   
  • For initial awards - March 2, 2009
   
  • For additional community college awards - September 2, 2009 - date postmarked (additional forms may be required)
   
   
 
• Colorado: Check with your financial aid administrator
 
• Connecticut: Priority deadline February 15, 2009 (additional forms may be required)
 
• Delaware: April 15, 2009
 
• District of Columbia: June 30, 2009 (additional forms may be required)
 
• Federated States of Micronesia: Check with your financial aid administrator (additional forms may be required)
 
• Florida: May 15, 2009 - date processed
 
• Georgia: Check with your financial aid administrator
 
• Guam: Check with your financial aid administrator (additional forms may be required)
 
• Hawaii: Check with you financial aid administrator (additional forms may be required)
 
• Idaho:  Opportunity Grant - Priority deadline March 1, 2009 (additional forms may be required)
 
• Illinois: 
   
  • First-time applicants - September 30, 2009
   
  • Continuing applicants - Priority deadline August 15, 2009
   
   
 
• Indiana: March 10, 2009
 
• Iowa: July 1, 2009
 
• Kansas: Priority deadline April 1, 2009 (additional forms may be required)
 
• Kentucky: Priority deadline March 15, 2009
 
• Louisiana: July 1, 2009
 
• Maine: May 1, 2009
 
• Marshall Islands: Check with your financial aid administrator (additional forms may be required)
 
• Maryland: March 1, 2009
 
• Massachusetts: Priority deadline May 1, 2009
 
• Michigan: March 1, 2009
 
• Minnesota: 30 days after term starts
 
• Mississippi: 
   
  • MTAG and MESG Grants - September 15, 2009
   
  • HELP Scholarship - March 31, 2009
   
   
 
• Missouri: April 1, 2009
 
• Montana: Priority deadline March 1, 2009
 
• Nebraska: Check with your financial aid administrator (additional forms may be required)
 
• Nevada: Check with your financial aid administrator (additional forms may be required)
 
• New Hampshire: May 1, 2009
 
• New Jersey: 
   
  • June 1, 2009 if you received a Tuition Aid Grant in 2008-2009
   
  • All other applications - October 1, 2009, for fall and spring terms;
   
  • March 1, 2010, for spring term only
   
   
 
• New Mexico: Check with your financial aid administrator (additional forms may be required)
 
• New York: May 1, 2010 (additional forms may be required)
 
• North Carolina: Check with your financial aid administrator
 
• North Dakota: March 15, 2009
 
• Northern Mariana Islands: Check with your financial aid administrator (additional forms may be required)
 
• Ohio: October 1, 2009
 
• Oklahoma: Priority deadline April 15, 2009 for best consideration
 
• Oregon: Check with your financial aid administrator
 
• Palau: Check with your financial aid administrator (additional forms may be required)
 
• Pennsylvania: 
   
  • All 2008-2009 State Grant recipients and all non-2008-2009 State Grant recipients in degree programs - May 1, 2009
   
  • All other applicants - August 1, 2009 (additional forms may be required)
   
   
 
• Puerto Rico: Check with your financial aid administrator
 
• Rhode Island: Priority deadline March 1, 2009
 
• South Carolina: Tuition Grants - June 30, 2009
 
• South Dakota: Check with your financial aid administrator (additional forms may be required)
 
• Tennessee: 
   
  • For State Grant - Priority deadline March 1, 2009
   
  • For State Lottery - September 1, 2009
   
   
 
• Texas: Check with your financial aid administrator (additional forms may be required)
 
• U.S. Virgin Islands: Check with your financial aid administrator (additional forms may be required)
 
• Utah: Check with your financial aid administrator
 
• Vermont: Check with your financial aid administrator (additional forms may be required)
 
• Virginia: Check with your financial aid administrator (additional forms may be required)
 
• Washington: Check with your financial aid administrator
 
• West Virginia: Priority deadline March 1, 2009 (additional forms may be required)
 
• Wisconsin: Check with your financial aid administrator
 
• Wyoming: Check with your financial aid administrator (additional forms may be required)
 

The recession seems to be bringing an almost constant stream of stories about people in all sorts of circumstances who are facing new and varied financial troubles.  These stories could easily be read as a guide for "things not to do in a recession."  The latest addition?  "Default on your student loans."

While neglecting even one payment is a bad idea at any time, borrowers who have found themselves in default on their loans are facing an even more difficult time as a result of the credit freeze.  The Chronicle of Higher Education published a story today about this particular aspect of the trouble facing participants in the Federal Family Education Loan Program. Currently, 19 of the nation's 35 guarantee agencies (the companies that service student loans in the FFEL program) lack a buyer for their student loans, including rehabilitated loans.

People who borrowed Stafford loans, defaulted on their payments, then agreed to "rehabilitate" their loans, or make consistent payments until the loan can be repackaged and resold and thus brought out of default, are finding that there's currently no market for their rehabilitated loans, so they're stuck in default status longer than necessary. This hurts their credit score and also keeps them from being eligible for federal student financial aid if they choose to go back to college, as many people affected by the recession are doing.

Currently, the federal government cannot buy up these loans, though legislation may be in the works to fix this.  While students do have other options, such as consolidation through Direct Loans (the federal government loan program), students were typically pushed toward rehabilitation before the credit crunch, as it was most profitable for the lenders, according to the Chronicle of Higher Education article.

If you have a student loan currently in repayment, be sure to work with your lender if you're having trouble making payments.  Look into consolidation loans, and ask about extended payment plans, in-school deferments (if you're planning to go back), loan forgiveness programs for certain career paths, and hardship forebearances.  Student loan debt cannot be discharged in bankruptcy, so if you default, you're stuck with the consequences--possibly for much longer than you'd think.

Paying for college can be a struggle.  Nobody wants to repay student loans forever, not everybody is going to land a full-tuition scholarship, and federal student financial aid seldom takes care of all college costs.  If you're a parent or relative looking ahead to cover college costs for a child, finding scholarships is a great step now, but you may also want to consider college savings plans.

Read below for information on 529 savings plans, which are one of the most popular and diverse options for college savings.  If this is not for you, check back tomorrow for more information on other savings options.

529 Savings Plans While 529 plans have sustained average losses of 21 percent in the last year, they can still be a good idea, especially if you choose your plan carefully and have plenty of time to save.  Many 529 plans allow you to move your savings into a much more conservative portfolio when the student nears college, an option they're sure to publicize based on the recent behavior of the stock market.  While there are limits on how many changes can be made to a 529 plan per year, the plans are otherwise quite flexible and varied, so it's easy to find one that works for your situation. Plus, 529 plans can be taken out in the parent's name, rather than the student's, so they will only minimally affect a student's financial aid eligibility.

Additionally, contribution limits are high, income limits are nonexistent, minimum contribution requirements tend to be low, and many states offer a variety of incentives for residents who contribute to their plans.  As an added bonus, many 529 plans can accept contributions from anybody anywhere, not just the people named on the account, and several programs have been created to take advantage of this.  For example, some plans allow a portion of credit card purchases or purchases at certain stores to go towards a particular student's 529 plan.

Prepaid Tuition Savings Plans If you're hesitant about sticking money for college in the stock market with uncertain returns, another type of 529 plan is also gaining popularity.  Prepaid tuition plans allow families to contribute a fixed amount now in exchange for a certain portion of tuition being covered in the future.  Many states do this for their state colleges and universities, and the Independent 529 plan, which is accepted by over 200 private colleges, also fixes contributions to portions of future tuition.  Both of these varieties eliminate worries about tuition inflation, though if tuition actually goes down between now and when the student starts college, a prepaid plan might not be the most lucrative option.

The Down Side 529 plans do have drawbacks and limitations.  Money must be spent on education, and the expenses that qualify are limited to undergraduate tuition, fees, educational expenses like books, and now computers. However, if the student is enrolled at least half-time, money from a 529 plan can also go towards room and board, so even if your student earns a full-tuition scholarship, it's possible to still take advantage of 529 savings.  Money must stay in a plan for at least 3 years, so if you're saving for a college sophomore, you're out of luck with these.  However, you can transfer the unused portion of a 529 plan to another family member without incurring the heavy withdrawal penalties, and it may also be possible to use the funds towards graduate or professional school.

Plans also vary from state to state, so your state's plan might not have the best benefits for you, or might not offer as sweet a deal in terms of tax breaks or low fees as the next state over offers its residents.  Luckily, you can shop around among a variety of plans, including ones offered by several other states.

529 plans are not the only college saving option, though they remain the most popular and perhaps the most well-known.  Check back tomorrow for information on the rest of the pack.

Continuing our theme from yesterday, today's blog post centers on more options for saving for college.  Yesterday, we discussed 529 plans, popular college savings vehicles that have been battered by recent financial troubles.  If you're considering saving for college but are not sold on a 529 plan, the most common alternatives are discussed below.

Coverdell ESA. Coverdell Education Savings Accounts are similar to 529 plans in most respects, but do have their own benefits and drawbacks. Rather than being sold by a state, they are sold by banks and brokerages, which can charge their own management fees. Because there aren't any state ties, there aren't any residency limitations, though there also aren't any state tax breaks for enrolling in a Coverdell ESA.

Coverdell accounts allow more flexible investment options and unlimited changes to investments. They can also be used to pay for high school and elementary school expenses, in addition to college costs. Otherwise, the expenses Coverdell and 529 plans can be used for are roughly the same: tuition and fees, books and supplies, room and board if over half-time, and other qualified educational expenses.

One major limitation to the Coverdell ESA is the $2,000 annual contribution cap. This is the limit per account holder, not per contributor. Additionally, individuals must have an adjusted gross income of $110,000 or below to contribute, and $95,000 or below to contribute the full $2,000. Coverdell accounts are held in the beneficiary's name, so they can hurt the student on the FAFSA. They also must be used or cashed out by the time the beneficiary turns 30, and they go to the beneficiary no matter what, while 529 plans can be given back to the parent in charge of the account if the student chooses not to go to college.

Roth IRA. The Roth IRA, typically used as a retirement account, can also be used to save for school. As long as you're withdrawing contributions, rather than earnings, there is no penalty if you are using the money from your IRA for educational expenses. However, a college savings plan might be the better way to go if you're setting up an account specifically for your student (especially since contributions to a Roth IRA must come from income the beneficiary earned from working), and dipping into your retirement funds to pay for college is widely regarded as a less than ideal choice by financial experts. But if you choose to take it, the option is there.

UTMA. The Uniform Transfer to Minors Act allows assets to be given as gifts to minors without the establishment of a trust. While the options explored up to this point have been savings accounts or investments, UTMA covers everything, including property. An adult manages these assets in a custodial account until the owner reaches the age of 18 or 21, depending on the state. In the meantime, the funds in the account can be used to benefit the child, including taking care of educational expenses. Once the owner reaches the age of majority, the assets are theirs to use as they please. This can mean paying for school, or it can mean making less desirable financial choices.  Since these assets belong to the student, they would count against them for student financial aid.

Government Bonds. While typically regarded as the province of grandparents, government savings bonds (Series EE is the most common) are also an option for paying for college. Bonds can be purchased online or at banks, and redeemed later for cash. As opposed to stock market-based savings plans which can lose big during crashes, government bonds are going to continue to grow as long as there's a government to honor them. And if there's no longer a United States government, well, you might have more to worry about than paying for college.

Also, since no rules state that a savings bond must be redeemed for college costs, the money can be used towards paying off student loans, covering college living expenses...or partying it up during spring break in Mexico.

While EE Savings Bonds grow at a steady rate, they do grow very slowly. You're also limited to a purchase of $5,000 per calendar year. Since they're such a safe bet, they can be great gifts for high school students, but a market-based option might be a better way to grow savings and maximize returns for younger children.

While April may be the cruelest month, March can be especially rough for students bound for college or graduate school.  Late March and early April are when admissions decisions and financial aid letters roll out for those not immediately accepted or rejected by their dream schools, and around now, things are getting pretty agonizing.  While a large part of March is consumed by waiting, even those who have already received good news may be consumed by the crushing dread of all the work to be done before September.  After all, if you get into a college or graduate school, you still have to figure out how to pay for it, what classes to take, what forms to complete, what to do with your life between now and then, and for many students, how to graduate on time, as well.  So, while you may still be waiting for a decision, there are things you can do in March to make April through August easier.

First, budget your time.  Figure out the things you'll need to do, and make a plan to get them done.  While you can't yet pick your classes or contact an unassigned roommate to figure out who is bringing the fridge or the TV, you can take care of other things.

If you haven't done so yet, complete the FAFSA.  If you did a FAFSA with your 2007 tax information, do your 2008 taxes and submit a correction.  Check your student aid report to see if you were chosen for verification, a process roughly equivalent to an audit of your FAFSA that is conducted by your college.  Colleges receive a glut of verification forms towards the start of the school year, and a delay in completing it can result in a delay in financial aid.  If you're not sure you've done everything you need to receive aid on time, contact the college to make sure.  It's better to find out now than to find out on the first day of classes when you need to buy books and find that you can't.

Keep searching for scholarships and submitting scholarship applications.  Deadlines are approaching rapidly, and available scholarships for the 2009-2010 academic year will only get more sparse as you approach the start of the fall semester.  This doesn't just go for high schoolers--if you're a soon-to-be graduate student with an acceptance letter in hand, but no assistantship or fellowship, don't count on funding emerging later. This can and does happen, but many schools make these awards with their admission decisions.

If you've received your financial aid award letter at your college of choice and it's come up drastically short, look into options for appealing it, especially if your financial circumstances have changed or if you've gotten a better offer from a different school.  You may also want to start shopping around for student loans. You might not be able to apply until summer (and you might not want to if you're currently applying for scholarships), but knowing what's out there now can help later.

If you take these steps now, then it will be easier to direct your spring and summer towards enjoying (or enduring) school, preparing to graduate, and figuring out your summer plans.  You'll also be less rushed and less likely to forget to do important things, like signing up to register for classes or mailing in a deposit on time.