Planning for Your Education 9781422296332, 1422296334

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All About Money: The History, Culture, and Meaning of Modern Finance Banking Basics Cost of Living Earning Money: Jobs Entrepreneurship A Guide to Teaching Young Adults About Money Investing Money Money and Relationships Planning for Your Education The Power to Do Good: Money and Charity Spending Money Sustainable Lifestyles in a Changing Economy Understanding Credit Understanding the Stock Market

Copyright © 2011 by Mason Crest Publishers. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, taping, or any information storage and retrieval system, without permission from the publisher. MASON CREST PUBLISHERS INC. 370 Reed Road Broomall, Pennsylvania 19008 (866)MCP-BOOK (toll free) www.masoncrest.com First Printing 987654321 Library of Congress Cataloging-in-Publication Data Fischer, James, 1988– Planning for your education / by James Fischer. p. cm. Includes bibliographical references and index. ISBN 978-1-4222-1768-9 (hbk.) ISBN 978-1-4222-1887-7 (pbk.) ISBN 978-1-4222-1759-7 (series) ISBN 978-1-4222-1878-5 (pbk. series) 1. College costs--United States--Planning. 2. Student aid--United States. 3. Education, Higher--United States--Finance. I. Title. LB2342.F56 2011 378.3’8--dc22 2010028157 Design by Wendy Arakawa. Produced by Harding House Publishing Service, Inc. www.hardinghousepages.com Cover design by Torque Advertising and Design. Printed by Bang Printing.

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Why Should I Go to College?. . . . . . . . . . . . . . . 8 You’ll Make More Money. . . . . . . . . . . . . . . . . 10 You’ll Have More Options . . . . . . . . . . . . . . . . 12 You’ll Find Out Your Potential . . . . . . . . . . . . . 14 You’ll Be Your Best . . . . . . . . . . . . . . . . . . . . . . 16 Pick the Right College for You. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Find Out More About the Colleges That Interest You. . . . . . . . . . . . . . . . . . . 20 Check the Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 What Do I Do to Get Ready? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Take the Tests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Apply for Admission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Application Tips. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 How Do I Pay for My Education?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Help from Your Family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Financial Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 How Much Financial Aid Can I Receive?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 What Will Financial Aid Pay For?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Scholarships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Savings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Money You Earn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Other Tips for Cutting College Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Are You Ready for the Future. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Here’s What You Need to Remember. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Words You Need to Know. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Further Reading. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Find Out More on the Internet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Photo Credits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 About the Author and Consultant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Our lives interact with the global financial system on an almost daily basis: we take money out of an ATM machine, we use a credit card to go shopping at the mall, we write a check to pay the rent, we apply for a loan to buy a new car, we set something aside in a savings account, we hear on the evening news whether the stock market went up or down. These interactions are not just frequent, they are consequential. Deciding whether to attend college, buying a house, or saving enough for retirement, are decisions with large financial implications for almost every household. Even small decisions like using a debit or a credit card become large when made repeatedly over time. And yet, many people do not understand how to make good financial decisions. They do not understand how inflation works or why it matters. They do not understand the long-run costs of using consumer credit. They do not understand how to assess whether attending college makes sense, or whether or how much money they should borrow to do so. They do not understand the many different ways there are to save and invest their money and which investments make the most sense for them. And because they do not understand, they make mistakes. They run up balances they cannot afford to repay on their credit card. They drop out of high school and end up unemployed or trying to make ends meet on a minimum wage job, or they borrow so much to pay for college that they are drowning in debt when they graduate. They don’t save enough. They pay high interests rates and fees when lower cost options are available. They don’t buy insurance to protect themselves from 6 

financial risks. They find themselves declaring bankruptcy, with their homes in foreclosure. We can do better. We must do better. In an increasingly sophisticated financial world, everyone needs a basic knowledge of our financial system. The books in this series provide just such a foundation. The series has individual books devoted specifically to the financial decisions most relevant to children: work, school, and spending money. Other books in the series introduce students to the key institutions of our financial system: money, banks, the stock market, the Federal Reserve, the FDIC. Collectively they teach basic financial concepts: inflation, interest rates, compounding, risk vs. reward, credit ratings, stock ownership, capitalism. They explain how basic financial transactions work: how to write a check, how to balance a checking account, what it means to borrow money. And they provide a brief history of our financial system, tracing how we got where we are today. There are benefits to all of us of having today’s children more financially literate. First, if we can help the students of today start making wise financial choices when they are young, they can hopefully avoid the financial mishaps that have been so much in the news of late. Second, as the financial crisis of 2007–2010 has shown, poor individual financial choices can sometimes have implications for the health of the overall financial system, something that affects everyone. Finally, the financial system is an important part of our overall economy. The students of today are the business and political leaders of tomorrow. We need financially literate citizens to choose the leaders who will guide our economy through the inevitable changes that lie ahead. Brigitte Madrian, Ph.D. Aetna Professor of Public Policy and Corporate Management Harvard Kennedy School 7 

Your path in life is pretty much set while you’re still in school. First you go to elementary school, then you move on to middle school or junior high, and finally you spend four years in high school. But what then? Most people go to college after they graduate high school. Some people go to two-year community college programs to get their associate’s degree or to prepare for a university, and some people go straight to a four-year program to get their bachelor’s degree. Over 50% of people in the United States have attended some sort of college, and this percentage is much higher among recent high school grads. College might seem like the next logical step in your life, or it may seem like a far-off dream. It might even be something you haven’t thought much about. Whatever you’re thinking now, you should seriously consider going to college. College offers a lot for students, not just tests and papers. If you get a college degree, you’ll earn more money in your life, you’ll open up new opportunties for jobs, you’ll get to study things you’re passionate about, and you’ll hopefully have some fun meeting new people and doing new things. College is a place to grow as a person and learn more about yourself, not just about math and history. Even if you don’t like school very much, you might love college. It gives you more freedom and choice, since you’re in charge of your education. You might find a new subject you’re passionate about that you’ve never even thought about, like anthropology, engi-

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neering, or African American studies. College is also a good transition between your high school life and the world of jobs and paying taxes. If you don’t go to college, you’ll probably have to find a place to live, or start helping more around the house, as well as find and keep a well-paying job. College gives you the skills you need to do these things successfully, and makes it easier for you to switch from a high school mindset to an adult one. College costs a lot of money, however, and lasts anywhere between two and five years, so you should plan carefully. There are lots of options for making college cheaper, like financial aid, getting a part-time job, or going to a college in your state, which usually has reduced rates for in-state students. Start thinking about college now, but don’t stress out about it. The sooner you know what steps you need to take to get into college, the less of a hassle it will be when it’s time to actually apply. It’s especially smart to start saving money now, in case you decide that college is the right path for you.

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College grads make more money—it’s a fact. People who have gone to college have more marketable skills and know more about the world, so companies usually prefer to hire people who have at least earned a bachelor’s degree. Studies show that the amount of money you can hope to earn in a year increases dramatically if you have more education. People who haven’t graduated from high school make an average of $24,000 a year, and people with high school diplomas earn about $32,000 a year. The average person with a two-year degree makes $39,000 a year. Once you get your four-year bachelor’s degree, though, you can probably make a lot more; people with fouryear degrees earn an average of $53,000 a year. Of course, it’s pretty expensive to go to most colleges. College is a sort of investment. You put some money into your education now, in the hope that it will pay off in the future. It’s a pretty sure bet though, since the money you put in to college will eventually be more than paid off by your higher salary in the future.

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Lots of jobs these days are highly specialized. Only people specifically trained to do them are hired. These sorts of jobs include librarians, engineers, teachers, and chemists. If you want to get any sort of job in the sciences or in academia especially, you’re going to have to go to college. People who have college degrees can follow their interests more easily than otherwise. Going to college gives you a whole set of skills that include writing, public speaking, quantitative reasoning, and critical analysis. You’ve probably already started learning most of these things,

What do you like to do? Use the Internet to narrow down your interests. www.bls.gov/k12 is a good place to start. It

DID YOU KNOW? matches your interests with lots of job possibilities that you may never have even thought of.

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but after you get to college, you’ll learn a lot more and perfect the skills you already have. College helps you figure out what your interests even are, so that you can choose a career after you graduate. It helps you turn your interests into a career that pays the bills and makes you happy to go to work. You can start thinking about what you’re interested in now. Do you like to write? Listen to music? Volunteer? Consider the things you like to do for fun, and how they could relate to your studies at college and become a career for you later on.

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One of the greatest things about college is that it gives you another chance to do well in school. You might doubt that you’re college material, espcially if you haven’t done that well in school so far, but you can start over again in college. As long as you feel up to living away from home, and can take care of yourself, then there’s no reason that you can’t succeed in college. You’ll never know until you try, so why not? If you believe in yourself, and are willing to put in the effort to do well, then with a little luck, you’ll be successful. That’s all well and good if you can get in to college in the first place. However, even if you have low grades right now, or think you’ll do terrible on standardized college admissions tests like the SAT or the ACT, you have a great chance of getting into college one way or the other. If you’re serious about getting into college, start trying to get your grades up and study for those tests. If you’ve tried and you can’t seem to do well

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in school, don’t panic. There are hundreds of colleges out there, with all sorts of different admissions standards. Community colleges can be excellent choices for students who struggled with high school. Most community colleges have open admission policies, and take almost everyone who’s interested in learning. Lots of people who go to community college find that they do extremely well, just because it’s a different atmosphere than high school. Some even go on to four-year schools afterward, once they get the hang of college and think they’re ready to tackle something more.

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You can bring out the best in yourself by going to college. You don’t just go to classes and read books all day, though that’s an important part of school. You also join clubs, volunteer in the community, form personal relationships with professors, and hear great speeches and lectures. Maybe you’ll even go abroad and see the world. College is a unique environment. Where else will you be surrounded by hundreds or thousands of young people just like you, with a support network of people who want to help you learn and grow? It’s a space to learn about the world and about yourself, hopefully while having a little fun. Of course, you have to be willing to put in a little effort to discover your best self. It won’t happen if you just sit there! Here are a few tips to succeed in college: • Go to class—Seems obvious, but the temptation to sleep through that 9 a.m. class can be strong. Don’t give in, or otherwise you’re wasting your money and your time while at college. • Get to know your professors—Go to office hours or stay after class to ask a couple of questions. Getting to know your professors makes you feel more involved with the college community, and can open up opportunities to do research on a topic you’re interested in. • Join one or more clubs—Figure out what you’re passionate about by joining campus clubs. Being part of a group also makes it easier to find friends with similar interests.

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• Stay organized—Keep track of when all your papers and assignments are due. You’ll be a lot further toward sucess if you turn everything in on time. • Keep track of your money—You want to be sure you have enough to buy the books you need for class. Make a budget if necessary. • Don’t forget to be social—Make time to hang out with friends. You won’t do well at school if you’re stressed out all the time.

Collegetips. com is an online college survival guide. It has study tips, dorm advice, and money information,

DID YOU KNOW?

among other helpful articles. Check it out before you get to college so you’ll be prepared.

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Picking a college is a big deal. You want to find a school that’s the right fit for you so that you’ll be happy and learn as much as possible. At the same time, the right college also has to be the right cost. Use all the resources you can to decide which colleges to apply to. Talk to your teachers and guidance counselors, who have helped hundreds of students just like you. They’ll have advice about how to start searching and what to look for in a good school.

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Actually visiting colleges gives you a sense of what the school is like in the real world, not just on a computer screen or a piece of paper. Most schools organize tours or visiting days for prospective students, but you can always just walk around campus if you go at a different time. Ask students questions, visit the admissions office, tour some of the classroom buildings, and take a look at the surrounding community. You’ll usually know right away if you’d be generally happy at a school or generally dissatisfied; go with your gut instinct and you won’t go wrong.

There are many websites that’ll help you prepare for college. The best ones are databases that have information on all the

DID YOU KNOW? colleges in the country. One example is the College Navigator: nces. ed.gov/collegenavigator.

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There’s so much you might want to know about the hundreds of colleges out there. It’s impossible to know everything about a school before you start, but it’s helpful to get a big picture of what sort of school it is so that you can figure out if it’s a good place for you to enroll. It’s better to know as much as you can beforehand so you don’t find yourself wanting to transfer after you’ve been there a while.

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There are entire books devoted to giving you all sorts of information, from racial diversity to tuition to things students have written about the college. Reading through these books can be daunting, but also exciting as you search for the perfect schools for you. There are lots of websites that offer the same services, that also have handy search engines. You can search by state, size, and prestige, among other criteria. Some of the things you should pay attention to are: • What majors are offered • How many students attend • Where the school is located • What the average SAT/ACT scores are for incoming freshmen • What sorts of organizations or clubs you could join • How big the average class size is • What the student-teacher ratio is • If on-campus housing is guaranteed all four years • How much financial aid is given out • How many commuter students enroll

Websites are great resources to research colleges and figure out what you want from a college. Go to collegeboard.com, usnews.com, or

DID YOU KNOW? collegiateguide.com to start looking, but look around for other websites if you can’t find what you need there.

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It’s an undeniable fact that cost is one of the biggest determining factors in where a lot of people go to college. Even if you find the school of your dreams, you might have to face the reality that you and your family just don’t have the money for it up front. However, before you dismiss a college as too expensive, make sure you know exactly how much it costs to go there for a year. Sometimes the information in college databases might be outdated or incorrect, so check with the college’s website or admissions office. College tuitions vary widely, depending on what sort of school you’re looking at. Twoyear community colleges usually cost a fraction of four-year schools. In the 2009–2010 school year, the average public two-year college cost $2,544. The average state-run, fouryear college cost $7,020. Tuition for in-state residents is often much cheaper, so you might pay less than this if you go to school in your home state. In the same way, you might pay more if you go to an out-of-state school. The most expensive colleges are private four-year schools. They cost an average of $26,273 per year in 2009–2010. Keep in mind that the cost of college tends to rise from year to year. If tuition is $10,000 A good resource this year, it’ll probably be $10,500 the next year, to use to find out more about $11,000 the next, and so on. Colleges have to your school’s financial aid is the U.S. Department keep paying more to offer their students the of Education’s Federal Student same kind of services from year to year, so they have to pass on the expense and raise tuition. Aid Information Center. Call their toll-free number at But you’re in luck! There are many ways of 1-200-4-FED-AID with financial aid bringing down that tuition fee, which can cost questions. more than $50,000 a year for some schools.

DID YOU KNOW?

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Most colleges offer financial aid if you apply for it. Financial aid comes in the form of merit scholarships, need-based scholarships, student loans, and federal work study. All of this can add up to half your tuition or more, making even expensive colleges a possibility if you’re strapped for money.

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Getting into college is a long process. Once you decide you definitely want to go, there are several steps that you’ll have to take to get from where you are now to a college classroom. Getting into college takes three main steps. First, you have to prepare while you’re still in high school, which mainly involves taking the SAT/ACT standardized college admissions tests. Second, you have to actually apply for admission. This includes doing research on various colleges, narrowing down the list of schools you apply to, and filling out the applications. Finally, once you’re accepted into one or more colleges, you have to choose which one you want to go to. Finances are an important part of this decision, so you’ll probably spend a lot of time thinking about money. This whole process can be pretty stressful. You’re balancing planning for your future with finishing up high school classes and trying to fit in time for your friends. It’s important to keep your cool in spite of all the things going on during this time. Make a schedule to keep yourself on track. The worst thing that can happen is leaving everything until the last minute; that makes you really stressed out and could mean that you don’t apply in time to be considered for admission. Talk to other people about what you’re feeling. Other friends going through the same process, parents, teachers, and guidance counselors can all help you deal with college application stress. Just remember that the end result of all this hard work is a chance to go to college, learn what you’re passionate about, and meet lots of new people.

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✓ ✓ ✓

Take the SAT or ACT Apply for admission Figure out the finances

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Nobody likes tests, but we all have to take them. Most colleges require that applicants take either the SAT or the ACT. They aren’t doing it to torture you, though. Colleges need some way of comparing students from all across the country. Every high school is different, so looking at grades alone doesn’t offer a standardized, consistent, or fair way of evaluating thousands of different students. A few colleges have gotten rid of the testing requirement, because they feel that tests don’t accurately reflect students’ abilities. Check with the schools you’re applying to and find out whether or not you need to take a standardized test. Standardized tests make most students nervous. A little nervousness is normal, but you’ll do fine if you prepare beforehand. There are tons of books and websites dedicated to helping students ace their standardized tests, as well as courses you can take through testing companies. And even if you don’t do as well as you hoped the first time you take it, you can always take it again to get a better score.

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How many schools should you apply to? There’s no one answer for everyone, but a good rule of thumb is more than one or two and less than nine or ten. The trick is to apply to enough so that you know you’ll get in somewhere, but not too many, or you’ll burn yourself out. These days, a lot of colleges accept a common application, so you only have to fill out one form for several schools. Others still have individual applications. Check to see what the admissions requirements are for your schools. They might include essays, recommendations, test scores, a high school transcript, and sometimes application fees.

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The Common Application is used by over 150 colleges. Even if you’re not planning on applying to college this year, check it out

DID YOU KNOW? anyway to figure out what you’ll need to do to apply in the future. Go to commonapp.org and click around.

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By the end of the college application period, you’ll be a pro at applying. For now, here are a couple of tips to help you submit the best applications you possibly can. 1. Ask for recommendations well ahead of time. It can take busy teachers and coaches a few weeks to write your recommendation, so don’t wait till the last minute. Check back with the person to make sure he or she sent the letter in, and don’t forget a thank you note afterward.

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2. Apply online. It’s usually easier than applying on paper, especially since you’ll know that your application didn’t get lost in the mail. Some colleges even waive their application fees if you apply online.

3. Submit your application as early as possible. Several colleges have rolling admissions, which means they look at applications as they come in. You have a better chance of getting in if you send it in earlier. Even if there’s one set due date, you’ll rest easier knowing your application is in, and you’ll have time to fix any problems with your submission.

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You’re in! You’ve sent in all your applications and received several offers of acceptance. It’s right about now that you realize just how much money college is going to cost you, now that it’s become a reality. Fortunately, there are a lot of ways you can pay for college. Also, remember that not everyone ends up paying full tuition. Colleges know that their prices aren’t affordable for many students who hope to attend. As a result, they often offer scholarships, loans, and grants to help you join their ranks of students. The government also steps in to help students afford college. Federal loans and grants, along with state aid, is available for many people. During

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the time you’re at school, the government may even pass new laws giving students more aid, since helping people get a good education is an important priority in the United States and many other countries. You’ll have to pay the difference between the cost of college and however much help you get from the college itself, along with the government and any other scholarships you’ve received. All in all, the rest will be covered by help from your family, your own personal savings, and any jobs you have now or in the future. Paying for college can be confusing, especially if you’re the first one in your family to go to college. Take it slow, start early, and talk to guidance counselors, teachers, and friends with older siblings who already went to college. Getting advice from people who have already gone through the process is the best information you can get.

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A lot of students’ families help them pay for college. This may very well be the case if your family has always assumed you’d be going to college once you’d graduated from high school. Maybe your parents set up a savings account for college the moment you were born, or maybe your grandma has agreed to pay for your first year. If so, then you have a lot to be grateful for. But not all families have extra thousands of dollars to spend, even on something as important as your college education. If you’re the first person in your family to go to college, for example, then your family might not be familiar with the college application and payment process. Talk to them about setting up a college savings plan for you now, if you know you want to go to college. Family savings options include savings accounts, savings bonds, and 529 plans. Savings accounts are bank accounts that earn interest on your initial deposit. If you put in $100 today, then in 5 years you might have $125. Savings accounts earn you some extra cash and keep your family’s money safe for college. If you buy a savings bond, you buy a promise from the government to pay back however much the bond is worth. You usually buy a bond for less than its face value, and then get the rest as the bond earns interest over time. A $50 bond can be bought for $25 but redeemed for the full $50 in a few years. 529 plans are savings accounts that are specifically for college tuition, books, and other expenses. You don’t have to pay taxes on the money you withdraw from the plan, as long as you use it for college. Sometimes states even let you deduct the money you originally put into the account from your taxes.

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Although it’s becoming more necessary to go to college in order to have a good career, school is getting more and more expensive. It seems ironic, but it’s true. However, everyone from politicians to college presidents realize that a lot of people can’t afford the rising costs of getting a higher education. That’s where financial aid enters the picture. Financial aid is any sort of monetary assistance given to students specifically to help pay for college. Aid comes in all sorts of forms. There are scholarships, grants, and loans. One of the most important sources of aid is from the federal government. The U.S. Department of Education gives out $100 billion a year in student financial aid, including grants, work-study, and low-interest loans. In order to get federal financial aid, you must fill out the Free Application for

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Federal Student Aid (FAFSA). This is a form that allows the government to assess how much you and your family are able to pay toward college, and how much aid the federal government should give you. The FAFSA can be time consuming to figure out and turn in, but it’s crucial that you take the time to fill it out so that you can get some help with paying those college bills. You need to fill out the FAFSA every year you’re in college, since your information, and your financial aid package, can change from year to year.

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You’d probably like enough financial aid to cover your whole tuition. That’s usually a bit unrealistic, but you’ll probably be able to get at least some aid. Two-thirds of all college students get some sort of aid. Some people don’t receive any simply because they don’t take the time to fill out the FAFSA or seek out scholarships. Assuming you want to be part of the portion of students who want some help paying for college, then you should know how much you can reasonably expect to pay by yourself. The FAFSA calculates your Expected Family Contribution (EFC), which tells colleges how much you and your family can realistically expect to pay for school for one year. The difference between a college’s tuition and your EFC is called your financial need. Your financial aid will be different for every college you apply to, since each college’s tuition will probably be different. Also, every year you fill out the FAFSA form, your EFC and your financial need will probably change. A college should offer to cover most or all of your financial need with loans, scholarships, and grants. The Expected Family Contribution is calculated based on your savings and your family’s income, assets, and size. In general, the lower your family’s income and the fewer assets your family has, the lower your EFC. If you have other siblings, especially brothers and sisters who are also going to college, you can expect to get more financial aid for your own college tuition. Ultimately, it’s up to each school’s financial aid office to determine how much you’ll have to pay. Don’t be disappointed if you don’t get as much money as you’d hoped for. Sometimes you can appeal the school’s decision if you think it’s unfair. It’s not unheard of for an office to make a mistake, and most are willing to correct an error if you bring it to their attention. Also, if you have been given more financial aid at another, similar school, you can try to convince the office to give you a matching amount.

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Between your actual tuition, your books, your dorm room, your food, and your transportation, there are a lot of things you have to pay for to go to college. The real cost of getting a higher education is more than just tuition. Financial aid can be used for some of the basic, and highest, costs associated with going to school. They include school tuition, room and board (dorms and meal plans), books and other supplies, and transportation to and from school. Some financial aid can only be used toward what you’re charged by the school, including tuition and room and board. Loans and scholarships that come from your college are examples of aid that you can only apply to the basic costs of college. Scholarships that are awarded to you in the form of a check can be used for anything. Think about using any smaller scholarships you get for books, since all those textbooks can cost you hundreds of dollars.

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Scholarships are the most generous financial aid you can receive. Think of them like gifts: they are essentially money you received without any obligation to pay them back. Scholarships come in different amounts, and are given to students by employers, individuals, companies, nonprofit organizations, and religious institutions. Colleges also give out many scholarships in financial aid packages.

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Scholarships come in two different types. Merit-based scholarships are given out based on your abilities. There are academic merit scholarships, as well as scholarships related to sports, volunteering, and special interests.

There are thousands of scholarships out there. All you have to do is find them! Try going to the Federal Student Aid

DID YOU KNOW? Scholarship Search at studentaid2.ed.gov/getmoney/scholarship/ v3browse.asp.

The other type of scholarship is based on financial need. If you can’t afford to pay full tuition, some colleges, businesses, and organizations offer scholarships entirely or partly based on how badly you need the money.

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Grants are another type of financial aid that are similar to scholarships because they don’t have to be repaid. There are a few differences, however. Grants are given by nonprofit organizations, and are usually tax-exempt. They are also often given with the intent of funding a specific project or program. The government has several grants available to students to help pay for college. The most well known is the federal Pell Grant. These grants usually go to students from low-income families that can’t afford to pay a lot for their children’s education. The maximum Pell Grant given to students has steadily risen over the last few years. For 2006–2007, the maximum grant was $4,050. For 2010–2011, the maximum was

You can find more information about all of these grants through the U.S. Department of Education’s

DID YOU KNOW? Federal Student Aid website. Go to studentaid.ed.gov and click on Grants under Federal Student Aid Programs.

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$5,550. The Academic Competitiveness Grant is an addition to the Pell Grant, given to students who took especially hard classes during high school. You should also look into grants that are awarded based on interests and goals. If you’re good at math or science, the National SMART (Science and Mathematics Access to Retain Talent) Grant might be for you. The SMART grant is given to students who are eligible for Pell Grants and are planning on going into a major like math, engineering, computer sciences, or one of several foreign languages critical to national security. The TEACH (Teacher Education Assistance for College and Higher Education) Grant is for students who eventually plan on teaching in schools in low-income neighborhoods. You receive the Pell Grant if you qualify when you fill out the FAFSA. The other grants require a couple of extra steps once you find out if you’ve received the Pell Grant.

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Let’s face it: you might have to use some of your own money to pay for college. Your family might expect you to pay for part of your own education, or you might not have gotten quite enough financial aid. But after all, a college degree is about the best way you can use your savings. If you know now that you want to go to college, then start saving. Set up a savings account specifically for college, and don’t touch it until you get there. If your spending money is separate from your college money, you’ll be less tempted to use it for other things. Then add a portion of all the money you get from your birthday, walking the neighbor’s dog, or anywhere else. Getting a part-time job after school or during the summer is probably the fastest way to earn money before you get to college. If you have time for a job, search around for one you would enjoy and that could help you start saving for all those college expenses.

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One of the most common forms of financial aid is the loan. Loans are contracts that let you borrow money now, and repay it later. Over time, your loans gain interest, which you have to pay off in addition to the original amount you borrowed. You usually won’t have to start repaying loans until you graduate or are no longer a student. If you and your family fill out the FAFSA, colleges give you a loan or two when they assign you a financial aid package. That way, you don’t have to fill out extra applications for loans. The federal government gives out more than $70 billion in student loans every year. These loans are low-interest, meaning that you have to pay a smaller interest rate than you would have if you took out the loan from someone other than the government. You can also look into loans from banks and companies that specialize in student loans, but

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they might not be as reliable. They require a credit check and often have higher interest rates, which means you’ll have to pay more for your loan in the end. The two main federal loans are the Stafford Loan and the Perkins Loan. There are two types of Stafford Loans. The subsidized version is given out to students based on financial need. Interest isn’t charged until you begin to repay the loan after graduation. Unsubsidized Stafford Loans, on the other hand, start collecting interest right away, once you sign up for the loan. The Perkins Loan is similar to the Stafford Loan, except that it is given out directly from your college, not the federal government. If you graduate with student loan debt, you’re not the only one. In 2007–2008, two-thirds of bachelor’s degree students graduated with some debt. The average loan debt was $23,186. Before you panic, consider your options. You can postpone paying off your debts if you go on to graduate school, or if you can’t find a full-time job. Instead of paying $200 a month for ten years, you could instead stretch out the time period to pay back your loan, and spend $100 for 20 years, at least for now. Finally, joining community service programs like AmeriCorps and Teach for America help you pay off your loans with special grants.

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Part of your financial aid package probably includes something called federal workstudy. Work-study allows you to get an oncampus job to pay for some of your college expenses. You might be awarded $1,000 in work-study, which means that you won’t get that money unless you earn it through college employment. You might as well take advantage of all that money waiting to

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be claimed. Many campus employers prefer students with work-study, so it shouldn’t be too hard to find one of these jobs. There are lots of places on-campus you can search for jobs. Try the library, student union, dining halls, or department offices. Many schools have a campus job board, too, so you can easily search for all the openings during the semester. If you’re feeling a little lost on campus once you move in, having a job can be a steadying influence. You’ll meet new people, get to know your college a little better, and be well on your way to paying for your education.

Federal Work Study is given to you only if you fill out the Free Application for Federal Student Aid (FAFSA).

DID YOU KNOW? Go to fafsa.ed.gov to figure out when you have to start thinking about filling it out yourself.

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Financial aid isn’t the only way of cutting college costs. There are several other ways of saving substantial sums of money. Keep an open mind, and you can find more creative money saving methods.

There are big differences between the cost for private and public schools. Public schools are run by states and are generally a lot cheaper to attend than private schools, and often just as academically rigorous. Take a look especially at the public schools in your state. Many offer big discounts for students who live in the same state. Sav-

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ings of up to $15,000 or $20,000 a year can be pretty enticing, even if you’ve always thought you’d like to go to school in another state. Room and board is a big drain on your savings, too. Living in a dorm room and having a full campus meal plan can hover around $10,000. To save some of that money, you could become a Residential Advisor, or RA. RAs are in charge of dorm halls or floors. It depends on the college, but they usually get paid for their duties, sometimes their room is free as well, and they get a reduced price on their meal plan. Another living option is to stay at home. If you’re going to school in your hometown, or a family member lives nearby, you might consider living off-campus with them. Living at home isn’t exactly the college experience, but if you need the extra $10,000, then it’s a serious option. You can even spend the first couple years of school earning some money to pay for housing on-campus or off-campus with your friends your last two years. Keep in mind that you might need to buy a car if you live at home, however. If a four-year college is just too expensive for you, consider going to a two-year school, which can cost $20,000, $30,000, or even $40,000 less than a four-year school. You’ll still be getting a higher education, but at a much lower cost. You can spend your extra time earning money for a four-year school, if you’d still like to go to one. After you’re done with your two years, you can transfer to a four-year school and earn your bachelor’s degree in another two or three years.

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Going to college is all about preparing for the future. So far, you’ve taken the SAT, applied You don’t to several colleges, picked one, have to get ready for college alone. Some and made a financial plan for paying for resources you can use include: college career offices, school. guidance counselors, the refer Mental preparedness is just as important as financial readiness. College is a big step, and will take ence section of your library, free online scholarship searches, religious communities, some time to get used to. It’s OK to be anxious or nerand ethnicitybased organivous about starting a new school, whether it’s a two-year comzations. munity college program, a private four-year college,

DID YOU KNOW?

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or a state-run school in your hometown. You’ll get the hang of things in no time, if you’re ready to learn new things, meet new people, and tackle new challenges. Besides getting your applications and your finances in order, there are some other things you should do before getting to school. Get a physical at your doctor’s office to make sure you’re healthy, spend some time with your high school friends, start packing up all your stuff if you need to, and make sure you know how to boil some pasta. Once you’re at college, you can focus on having fun and learning, as well as preparing for the next stage of your life after you earn your degree.

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• College is a great opportunity to learn more about the world, become a better person, and make more money in the future. More and more people are going to college after high school because jobs are getting more specialized and need more training. • Not everyone can afford college tuition, not to mention room and board, transportation, and textbooks. Financial aid helps students and their families pay for college, so that they don’t have to pay hundreds of thousands of dollars out of pocket. • Getting ready for college takes some work. You’ll have to take the SAT or ACT, pick the schools you want to apply to, and send out the applications. All your work will be worth it once you get those acceptance letters back. • Financial aid includes merit-based and need-based scholarships, loans, grants, and federal work-study. Fill out the FAFSA form before you get to college so that you’re eligible to get financial aid to help you pay for tuition. • Get creative when saving up for college. Consider living at home, going to a cheaper community college, or getting a part-time job to start saving up.

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academically rigorous: A school with high standards of learning and intellectual achievement, a strong faculty, and serious students. ACT: American College Testing; a standardized college entrance exam that assesses a high school student’s general educational development and their ability to complete college-level work. critical analysis: The ability to carefully evaluate texts and ideas. daunting: A challenge that may seem overwhelming. graduate school: Additional education leading to an advanced degree (a Master’s or PhD, for example) after completion of a bachelor’s degree. grants: Financial resources made available for specific purposes (like education) from public or private sources. merit scholarships: Financial aid that is awarded based on a student’s academic achievements. need-based scholarships: Financial aid that is awarded based on a student’s financial need. nonprofit organizations: Charitable groups that often provide funds, like scholarships, for good causes; like their name suggests, they do not operate to make profits.

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prestige: Having a reputation for excellence and high standards. quantitative reasoning: The ability to apply mathematical concepts and skills to solve real-world problems. SAT: The SAT Reasoning Test (formerly Scholastic Aptitude Test and Scholastic Assessment Test) is a standardized test for college admissions that is owned, published, and developed by the College Board, a nonprofit organization. standardized: Making something conform to a set. Standardized testing refers to a method of testing in which the same test is given in the same way to all test takers so that it can be scored and evaluated consistently. tax-exempt: Not having to pay taxes, as on certain educational grants from nonprofit organizations. transcript: A complete list of a student’s classes and grades. waive: To not charge a fee that is normally charged, usually done as a reward or as a courtesy.

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Fowles, Debby. 1000 Best Smart Money Secrets for Students. Naperville, Ill.: Sourcebooks, Inc., 2005. Kaplan, Ben. How to Go to College Almost for Free. New York: Collins Reference, 2001. Korn, Rachel and Jennifer Yetwin Kabat. Getting Into College. Atlanta, Ga.: Hundreds of Heads Books, LLC., 2009. Student Financial Services. The Government Financial Aid Book: The Insider’s Guide to State and Federal Government Grants and Loans. Seattle, Wash.: Perpetual Press, 1999. Tanabe, Gen and Kelly Tanabe. The Ultimate Scholarship Book 2010: Billions of Dollars in Scholarships, Grants and Prizes. Belmont, Calif.: Supercollege, LLC, 2009.

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Campus Tours www.campustours.com FinAid! The Smart Student Guide to Financial Aid www.finaid.org MyCollegeSuccessStory.com www.mycollegesuccessstory.com Princeton Review College Information www.princetonreview.com/college-rankings.aspx US News College Rankings colleges.usnews.rankingsandreviews.com/college

The websites listed on this page were active at the time of publication. The publisher is not responsible for websites that have changed their address or discontinued operation since the date of publication. The publisher will review and update the websites upon each reprint.

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ACT 14, 21, 24, 27

Pell Grant 44–45

applications 24, 28, 30–32, 34, 36, 55

public schools 22, 52

bachelor’s degree 8, 11, 49, 53

recommendations 28, 30 Residential Advisor 53

community college 8, 15, 22, 54

room and board 40, 53

Expected Family Contribution (EFC) 39

SAT 14, 21, 24–25, 27, 54 savings 33, 39, 46, 53

FAFSA 37, 39, 45, 48, 51

account 34, 46

federal work study 23, 36, 50–51

bonds 34

financial aid 9, 21–23, 36–37, 39–40,

scholarships 23, 32, 36, 39–40,

42–44, 46, 48, 50, 52 four-year college 11, 15, 22, 53–54

stress 9, 17, 24

grants 32, 36, 39, 44–45, 49

taxes 9, 34, 44

high school 8–9, 11, 15, 24, 27–28, 34, 45, 55 jobs 8–9, 12, 33, 46, 49–51 loans 23, 32, 36, 39–40, 48–49

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42–44, 54

Fotolia: 46–47, 48–49, 50–51, 52–53, 54–55 Kablizech: pp. 40–41

Takai, John: pp. 38–39 Wolf, Rich: pp. 8–9 Yemelyanov, Maksym: pp. 26–27

KonstantinosKokkinis: pp. 8–9, 12–13, 14–15, 16–17, 18–19, 28– 29, 30–31 Kounadeas, Loannis: pp. 10–11, 20–21, 22–23, 34–35 Maxwell, Scott: pp. 20–21, 32–33, 36–37, 42–43 Petra, Ciz: pp. 44–45 Rasm: pp. 18–19 Skvoor: pp. 24–25

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James Fischer received his master’s in education from the State University of New York, and went on to teach life skills to middle school students with learning disabilities. Money management and financial skills were a major part of his emphasis in the classroom. He has applied these skills to his writing for this series. Brigitte Madrian is Professor of Public Policy and Corporate Management in the Aetna Chair at Harvard University’s Kennedy School of Government. She has also been on the faculty at the Wharton School and the University of Chicago. She is also a Research Associate at the National Bureau of Economic Research and coeditor of the Journal of Human Resources. She is the first-place recipient of the National Academy of Social Insurance Dissertation Prize and the TIAA-CREF Paul A. Samuelson Award for Scholarly Research on Lifelong Financial Security.

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