For many Americans, a college degree seems more unattainable than ever. Tuition has skyrocketed – up 439 percent between 1982 and 2008, while family incomes only increased 147 percent (not adjusted for inflation).
But that doesn't mean that higher education is out of reach. College financial aid – student loans, grants, and scholarships, plus programs available from individual colleges and universities – is helping to ease tuition sticker shock.
In addition, the federal stimulus included $100 billion for higher education, much of which colleges and universities have used to prevent or minimize planned tuition increases. Earlier this year, Congress voted $36 billion to increase Pell Grants, using money saved by eliminating subsidies to banks that offer student loans. This year, Pell Grants will be $5,500 – around $800 more per grant than two years ago. For the first time, Pell Grants will rise with cost of living increases.
Congress consolidated all federal loan programs into the Direct Loan Program, so families will be able to find college financial aid more easily.
Yes, they’ll still need to fill out the Federal Application For Student Aid (FAFSA).
About 1 in 4 families didn’t bother to fill out the FAFSA in 2009-2010, thereby passing up their chance for federal student loans, according to a survey conducted by Sallie Mae and Gallup. Half of those families either had never heard of it or else thought that they weren’t eligible. They chose to pull money out of investments or else take out private loans to cover education costs. Bypassing FAFSA cost them as much as 15 percent more for the loan, according to federal estimates.
Why are federal student loans a better idea than private loans? Repayment benefits and interest rates. Federal loans don’t need to be repaid until six months after graduation, plus they typically have much lower interest rates than private loans. For families whose FAFSA qualifies them for a subsidized Stafford loan, the government will pay all interest on the loan until six months after graduation. Families in higher income brackets can get unsubsidized Stafford loans, which still provide the low interest rates and the delay in repayment, but which do allow the interest to accrue.
The government has created several websites to help families find money for college:
- Student Aid on the Web, their financial aid and scholarship wizard.
- How to pay for college at college.gov.
- PLUS loans for parents at studentaid.ed.gov.
Plus, the government is funding several scholarships (not loans, free money!):
- Academic Competitiveness Grant for college freshmen and sophomores who are eligible for Pell Grants and who took "rigorous" classes in high school.
- Federal Supplemental Educational Opportunity Grant for undergraduates with exceptional financial need.
- Iraq and Afghanistan Service Grant for students who lost a parent serving in the Iraq or Afghanistan wars.
- National Science and Mathematics Access to Retain Talent Grant (SMART Grant) for college juniors and seniors with a GPA 3.0 or higher in their major, who are eligible for Pell Grants, and who are majoring in mathematics, technology, engineering, a foreign language critical to national security, or physical, life, or computer sciences.
- Teacher Education Assistance for College and Higher Education Grant (TEACH Grant) for students who plan to teach in low-income schools.