Financial Aid for College Second Edition by David Rye, M.B.A. A member of Penguin Group (USA) Inc. Financial Aid for College Second Edition by David Rye, M.B.A. A member of Penguin Group (USA) Inc. To my best friend and wife, Marcia, who made sure I was fed and watered while I wrote this book. You dealt with my episodes of stress and frustration throughout the process and I love you more than ever for all the support you gave me. ALPHA BOOKS Published by the Penguin Group Penguin Group (USA) Inc., 375 Hudson Street, New York, New York 10014, USA Penguin Group (Canada), 90 Eglinton Avenue East, Suite 700, Toronto, Ontario M4P 2Y3, Canada (a division of Pearson Penguin Canada Inc.) Penguin Books Ltd., 80 Strand, London WC2R 0RL, England Penguin Ireland, 25 St. Stephen’s Green, Dublin 2, Ireland (a division of Penguin Books Ltd.) Penguin Group (Australia), 250 Camberwell Road, Camberwell, Victoria 3124, Australia (a division of Pearson Australia Group Pty. Ltd.) Penguin Books India Pvt. Ltd., 11 Community Centre, Panchsheel Park, New Delhi—110 017, India Penguin Group (NZ), 67 Apollo Drive, Rosedale, North Shore, Auckland 1311, New Zealand (a division of Pearson New Zealand Ltd.) Penguin Books (South Africa) (Pty.) Ltd., 24 Sturdee Avenue, Rosebank, Johannesburg 2196, South Africa Penguin Books Ltd., Registered Offices: 80 Strand, London WC2R 0RL, England Copyright © 2008 by David Rye, M.B.A. All rights reserved. No part of this book shall be reproduced, stored in a retrieval system, or transmitted by any means, electronic, mechanical, photocopying, recording, or otherwise, without written permission from the pub­ lisher. No patent liability is assumed with respect to the use of the information contained herein. Although every precaution has been taken in the preparation of this book, the publisher and author assume no responsibility for errors or omissions. Neither is any liability assumed for damages resulting from the use of information contained herein. For information, address Alpha Books, 800 East 96th Street, Indianapolis, IN 46240. THE COMPLETE IDIOT’S GUIDE TO and Design are registered trademarks of Penguin Group (USA) Inc. Library of Congress Catalog Card Number: 2007935867 ISBN: 1-4362-1223-5 Note: This publication contains the opinions and ideas of its author. It is intended to provide helpful and informa­ tive material on the subject matter covered. It is sold with the understanding that the author and publisher are not engaged in rendering professional services in the book. If the reader requires personal assistance or advice, a compe­ tent professional should be consulted. The author and publisher specifically disclaim any responsibility for any liability, loss, or risk, personal or otherwise, which is incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this book. Publisher: Marie Butler-Knight Copy Editor: Amy Lepore Editorial Director: Mike Sanders Cartoonist: Shannon Wheeler Managing Editor: Billy Fields Book Designer: Trina Wurst Acquisitions Editor: Michele Wells Indexer: Joan Green Development Editor: Julie Bess Layout: Chad Dressler Senior Production Editor: Janette Lynn Contents at a Glance Part 1: The Lowdown on Financial Aid 1 1 What’s Financial Aid All About? 3 Find out what financial aid is and learn about the differ ent types of aid you can apply for on behalf of your kids. 2 Staking Out Your Financial Aid Claim 15 Find out how to quickly determine whether you’re eligible for financial aid, and learn the basics of how to apply for it. 3 Answers to All Your Financial Aid Questions 27 Get the scoop on the important stuff you’ll need to know when you apply for financial aid. Part 2: Planning Is Everything 39 4 So, Kid, You Want to Go to College? 41 Discover the steps you should take to plan for your kid’s college education. 5 Where Do You Want to Go, Kid? 55 Learn how to select the college or university that is right for both your kid and your pocketbook. 6 Take the Tests 67 Learn what admission tests are all about, why you must take them, and what you can do to prepare for them. 7 College Costs and Financial Planning 83 Find out how much it will cost to send your kids to the colleges of their choice, or your choice when reality sets in. 8 Develop a College Savings Plan 101 Create a financial plan that will help you determine how much money you’ll need to fund your kid’s college educa tion. Part 3: Seek and You Shall Find—Money 115 9 Grant Me a Grant 117 Know how to seek out and find your best options among grants, scholarships, low-interest loans, and work-study programs. iv The Complete Idiot’s Guide to Financial Aid for College, Second Edition 10 State Aid Programs 131 Get an overview of state aid programs and learn how to find hidden state aid funds that a lot of parents don’t know about. 11 Playing the Scholarship Game 139 Uncover great scholarship programs and learn what you can do to improve your chances of winning scholarships. 12 Military and Veteran Scholarship Programs 149 Survey the outstanding scholarship and financial aid pro grams that are available to veterans, military personnel, and their dependents. 13 Minority and Other Special Programs 161 Get an overview of programs for minority, women, handi capped, and nontraditional students and information on where to find special student aid. 14 Adult, Graduate, and International Programs 173 Discover adult financial aid options, opportunities for graduate students, and unique programs for study abroad. 15 The Inside Scoop on Student Loans 185 Learn what it takes to apply and qualify for a low-interest student loan. 16 Tax-Saving Strategies 201 Discover several options for saving tax money using funds earmarked for your kids’ education. 17 Financial Aid Consulting Services 213 Learn what financial aid consultants have to offer so that you can make an informed decision about whether you need one. Part 4: From Applications to Offers 221 18 What’s Inside a Financial Aid Package? 223 Get an overview of what’s in the financial aid package you’ll receive, with emphasis on the important parts. 19 Decoding the Forms 233 Learn everything you need to know about the forms you’ll be required to fill out when you apply for financial aid. 20 What Does an Offer Look Like? 239 Know what to look for in an offer so that you’ll be in a position to determine whether it’s a good one. Contents at a Glance v 21 Negotiating a Better Offer 247 Discover why you may want to negotiate a better offer after we show you how initial offers are created. Part 5: Okay, You’re Accepted and You Have Aid: Now What? 259 22 Opportunities Are Everywhere 261 See how applying for additional financial aid and contests can be fun, rewarding, and educational for your entire family. 23 Cost-Cutting Strategies 275 Learn what you can do to dramatically reduce your college expenses so you’ll have more money in your pocket. Appendixes A Glossary of Financial Aid Terms 287 B Directory of General Financial Aid Resources 303 C State Department of Education Directory 335 Index 343 Contents Part 1: The Lowdown on Financial Aid 1 1 What’s Financial Aid All About? 3 Where’s the Money Coming From? ............................................. 4 Uncle Sam’s Contribution ............................................................. 4 The Federal Aid Umbrella ............................................................ 4 State Coffers................................................................................. 5 Hidden College Funds ................................................................... 5 Private Sources ............................................................................. 5 Types of Financial Aid ................................................................... 6 Grants Are Great ......................................................................... 6 Scholarships Are Everywhere......................................................... 6 Athletic Scholarships...................................................................... 7 Merit Scholarships ........................................................................ 7 Low-Interest Loans........................................................................ 7 Federal Direct Loan Program ....................................................... 8 Family Education Loans................................................................ 8 Stafford Loans.............................................................................. 8 Parent Loans ................................................................................ 9 Perkins Loans ............................................................................... 9 Work-Study Programs.................................................................. 9 Service-Learning Programs .......................................................... 9 The Connection Between Community and College ....................... 10 Why Service Programs Are Important........................................ 10 Tips on Applying for Financial Aid ............................................ 10 The Federal Formula .................................................................. 11 Consider Using Your Home......................................................... 11 Watch Your Assets....................................................................... 11 Your Expected Contribution ........................................................ 12 Watch for Fraud ........................................................................... 12 2 Staking Out Your Financial Aid Claim 15 Eliminate Frustration: Do Your Research .................................. 16 Who Gets the Money? ................................................................ 17 Do You Need the Money? ........................................................... 17 What’s Considered Total Cost? .................................................... 18 More Expensive May Be Cheaper................................................ 18 Misconceptions About Need.......................................................... 18 viii The Complete Idiot’s Guide to Financial Aid for College, Second Edition What You’re Expected to Pay...................................................... 19 Low-Income Families .................................................................. 19 Middle-Income Families.............................................................. 19 Wealthy Families ........................................................................ 20 Is Your Kid Eligible?.................................................................... 20 Stepping Into the Application Process ........................................ 21 Step 1: Complete the Application ................................................. 21 Step 2: Evaluate the Student Aid Report..................................... 22 Step 3: Receive and Consider Offers ............................................ 22 Dispelling Financial Aid Myths .................................................. 22 Do You Need Help? ..................................................................... 23 Other Sources of Money.............................................................. 24 Admissions Counselors ................................................................ 24 Special-Programs Operatives....................................................... 24 Financial Aid Officers ................................................................ 25 3 Answers to All Your Financial Aid Questions 27 Why Does College Cost So Much? ............................................ 28 How Much Money Goes into Financial Aid Annually?............. 28 If I Apply, Will Strangers Pry into My Personal Business? ....... 28 Isn’t Asking for Financial Aid the Same as Asking for Welfare?...................................................................................... 29 Does Each College Have a Different Financial Aid System? .... 29 How Can I Get the Most out of the System? ............................. 29 How Do I Know If I’m Eligible for Financial Aid? ................... 30 Is My Kid Eligible for Special Aid?............................................. 30 Merit-Based Scholarship Myths .................................................. 30 Athletic Scholarships.................................................................... 31 Extracurricular Activities........................................................... 31 How to Be a Contender ............................................................... 31 Third-Party Organizations......................................................... 32 Corporations ............................................................................... 33 Service Organizations................................................................. 33 How Many Aid Sources Should I Explore? ................................ 33 When Should I Submit Applications? ......................................... 33 Where Can I Get More Information and Guidance? ................ 34 When Should I Begin Planning for My Kid’s Education?......... 35 How Can I Find Out If I Qualify for Assistance? ...................... 35 Is There an Income Cutoff for Federal Aid?................................. 35 Do I Need to Reduce My Asset Base to Qualify? .......................... 35 Isn’t the Federal Government Reducing Financial Assistance Programs? ................................................................................ 36