Simple strategies families can use to plan for college costs

When it comes time for parents to send their kids off to college, families are often faced with the financial burden of wondering how they’re going to pay for their child’s education. The annual cost of four years of college is increasing and weeding through the many resources available can lead families to choose a plan that won’t be beneficial to them in the long run. As a result, families risk digging themselves deeper into debt than anticipated. While taking the time to figure out the perfect plan for your family based off of your finances can seem impossible and confusing, there are four strategies families can use in order to ensure they are taking the best steps for themselves, their children and their bank account.

Start planning before your child is ready to apply to college

Developing a strategic plan begins with simply having an open conversation on who will ultimately be the most responsible for college costs. Every family is different and there is no right or wrong answer. For some, parents will take on that responsibility while others will have their student be responsible, or partially responsible, for repayment. Either way, having the conversation now will guide the application and financial process moving forward.

Next, look at your child’s top schools and assess the total cost of each early on in the application process. With this “start at the end” approach, families can have an idea of what a college is going to cost them come graduation day, before they even send in the application. Armed with this knowledge, parents and students can better plan for how they need to borrow and/or pay themselves once any financial aid is used. Free tools such as the College Money Report, help parents and students get a better understanding of the financial aid process ahead of sending in their college application as well.

Get to know the FAFSA + CSS Profile

The Free Application for Federal Student Aid (FAFSA) is the form families are required to fill out in order to receive any financial aid from the federal government to help pay for college and also determines a student’s eligibility for financial aid. Each year, the U.S. Department of Education awards more than $120 billion in federal grants, loans, and work study programs to help students fund their college education. Yet, 28% of undergrads don’t complete the application, and miss out on this aid money. While the FAFSA application can be confusing and complex, it’s one of the most important steps in the process to help pay for college.

The next form is the College Scholarship Service Profile (CSS Profile), an online application created and maintained by the College Board that allows college students to apply for non-federal financial aid. While it’s not a typical request from a college to complete the CSS profile, a good number of colleges do require it. The CSS Profile works to get a better understanding of a family’s financial situation and allows for opportunities for families to share any particular situations that would affect how they pay for college. The potential end result could bring lower costs and new scholarship opportunities.

Plan to negotiate with your top pick colleges

A little-known fact about higher education costs is around the ability to negotiate. Just as any other large investment made in your lifetime, such as the purchase of a new car or new home, there is some room to negotiate. As colleges send students their acceptance letters and how much financial aid they’re willing to offer, parents and students have the option to go back and ask for more. Colleges are a business, and they’re hoping to secure you as their newest customer. While it’s never guaranteed, with a successful negotiation, families can expect to receive an additional $3,500- $5,000 annually. It’s important to keep in mind that getting more money from a public college is harder to achieve than private schools. It’s best to only go back to ask for more money from your top choice schools. The final answers often help guide families on selecting the best school both financially and strategically based on their major and location.

Review the benefits around Federal and Private Student Loans 

The best student loan option will vary for every student and family, and how you determine the right fit for you will depend on the earlier conversations had as a family on who is taking on the bulk of the responsibility to pay back the loan. Private student loans are often tied to the lowest interest rates, which will vary from 3% to 15%, and those rates are usually all-driven by the co-signer. If your cosigner has great credit, private loans will help ensure you get the lowest rate. But where private loans may have lower rates overall, they are the least flexible in repayment terms. Federal loans may have higher interest rates, not always, but they offer the most flexibility in repayment terms which helps to protect the borrower in case of job loss or another unplanned event. In many instances, the forgiveness options available in federal loans payment plans do not exist in the private sector as well.

As parents approach the college application and financial aid process, while it may seem daunting, communicating as a family to ensure you’re overseeing the moving parts, tracking deadlines, and reviewing financial information will help keep you on track to successfully navigate college costs.

Matthew Carpenter is the founder of College Funding Services (CFS), creator of the free financial aid resource site, ineedfinancialaid.com. For the past decade, CFS has helped tens of thousands of families find the best possible college for their students and demonstrated how to attend college for the least amount of money.