Factoring Finance into College Planning
The ‘college talk’ should include how to pay for it
College acceptance letters have been delivered to millions of students across the nation. As students weigh their options, they’ll consider campus life and academic quality, but one critical factor in choosing the right college is often rushed at this most consequential moment: how to pay for it.
Even though paying for college represents one of the first significant financial commitments a young person will make, many don’t have comprehensive discussions about how to manage that cost. According to a 2020 survey conducted by Ipsos and Sallie Mae®, 90% of families have discussions about college, but only two-thirds of families actually discuss the financial logistics.
The survey also found that those who plan ahead for college are three times more likely to feel confident about how they will afford it. This is one of the many reasons why Sallie Mae encourages students to discuss their options early and provides free tools to help students and their families navigate the college decision — and financing — process.
Ask questions about the financing process
The college process is constantly changing, and family members and other trusted adults who are looking at financing options with a student might be surprised. What they may recall from their own experiences — whether a few years ago or a few decades ago — has likely changed. An early start will give everyone the time and space to weigh all options.
The best way to begin is by asking questions — and getting answers — about your specific needs. Having a plan will allow you to compare financial aid offers and factor scholarships and grants into your financing formula. Just as important is considering the additional costs beyond tuition. Room and board, books, computers, and transportation can add up very quickly.
Sallie Mae suggests a three-step approach to help with college financing planning:
- Begin with money students won’t have to pay back, such as scholarships, grants, and work-study. These can become critical tools to help students and families make college more affordable because they help reduce the total price tag. Even so, it can be difficult to understand where to find them and how they fit into a student’s greater college financial plan.
Sallie Mae offers a number of free tools to help students access and understand their options, and you don’t have to be a Sallie Mae loan customer to access them. The free scholarship search tool is one of the most popular tools for students looking for more opportunities. In 2020 alone, 24,000 students were connected to scholarships, covering $67 million in college costs. Families should also utilize planning calculators to get a sense of the bigger paying-for-college picture. Sallie Mae’s planning calculator allows students to enter savings, scholarships, grants and loans and see the full cost of attending a school.
- Explore federal student loan options, which account for about 90% of today’s outstanding college loans. That starts with completing the Free Application for Federal Student Aid (FAFSA®). Unfortunately, too many families skip the FAFSA because they think it’s too complicated or that they won’t qualify for financial aid. This oversight means potentially missing out on thousands of dollars in financial aid.
- Turn to a private student loan to fill the gap. After maximizing scholarships, grants and other federal financial aid, Sallie Mae helps students fill any financing gap by offering private student loans. Often secured with a cosigner, private student loans go through underwriting to ensure customers will be able to manage them successfully. Students and their families are encouraged to evaluate all anticipated monthly loan payments, and how much the student expects to earn in the future, before considering a private student loan.
By having the talk about how to pay for college now, students will be better prepared to make informed decisions that will serve them today and for years to come. They will enter their college years with more confidence that the financial obligations they are assuming are prudent and manageable.
It’s why Sallie Mae is working to bridge the knowledge gap in financial literacy — so students can make thoughtful decisions now that will set them up for the life they want.
FAFSA is a registered service mark of U.S. Department of Education, Federal Student Aid