New Student Loan Landscape

By Jonnelle Marte

Toni Martello, a current college student at Wesleyan University, points out some tricks and tips to help you pay for college.

To start you off, here are some tips to make applying for and dealing with financial aid as painless as possible:

What Can I Do Early?

File taxes early! The sooner you get them done, the sooner you can complete your applications for the year.

File your applications early! Although in most cases it does not hurt to submit your applications nearer to the deadline, many schools have penalties (which can add up to hundreds of dollars) for late or incomplete applications. It’s pretty common to have documents disappear or to discover a missing signature on a form, and sometimes it can take the school or processing company a while to catch these things. If you get everything in early, you will still have time to correct any mistakes they find or to re-supply information that may have gotten lost in the shuffle.

Hang on to any and all important financial documents throughout the year and put them in one safe place. This will save you countless hours of searching through piles and drawers when the time comes to file the FAFSA. W-2s and your most recent pay stubs are a must, as are any papers linked to filing taxes. If you itemize your deductions, any receipts or tax write-offs will come in handy, and so will medical bills and financial records. You will probably be required to submit copies of many of these documents as well, so keep them easily accessible in a pre-determined place such as a file cabinet for when the time comes.

What Can I Do On My Own?

Look for outside scholarships to supplement what you can get from your school. Apply to as many as you can find – there is a lot of competition, but there are also lots of scholarships out there waiting for eligible applicants. A Google search is useful, but also look in unexpected places: local organizations, churches, community centers, even employers. Many scholarships are targeted toward specific demographics, so start with what you already know. Your school’s financial aid office is also a good source and may have a list or database for you to check. The resource section of your local library may be another good starting point.

Be wary of online schemes, though. You should never have to pay for the opportunity to search for scholarships, and many companies offering assistance for hire are not worth their expensive fees. Fortunately, once you have applied and been given your package, your work is pretty much done.

Of course, outside scholarships are optional. Some people go nuts applying for every scholarship under the sun. Others really cannot stomach the whole process. You may find that you are ambivalent: On the one hand, they are offering free money, and that’s great, right? On the other hand, you may feel resentful or pressured into doing this.

Consider whether you have the time to complete the application, how extensive the application is, your chances of getting the scholarship, and how much it is worth to you before applying. Maybe you will find that the potential payoff is not worth the stress and additional work.

Remember, though, that once the money’s in the bank, you may feel that the payoff is well worth the effort. If you do decide to go for scholarships, keep in mind that there are plenty out there. It may take some digging, but you will undoubtedly find a fair few for which you are eligible. Once you get to the graduate level, criteria become narrower and scholarships may be fewer and farther between.

Fight for your money! In most cases, the first financial aid package you are granted represents a college’s final offer. However, it almost never hurts to ask for more. The financial aid offices definitely do not advertise this, but sometimes people can get their packages expanded simply by asking.

The best time to ask is when you are a prospective student who is still deciding between schools. Mention the other school, and explain your situation. I have even heard of schools getting into bidding wars over a student. It helps if you are a particularly attractive candidate to the schools, but even if you are just an average student, many colleges have a one-time reevaluation policy. Just make sure that they do not have a policy whereby they can cut your initial offer upon further review–some schools do leave this option open.

Be nice to the people who work in the financial aid office. They control the amount of money you receive, and they are also the most likely to be able to help when you are in a bind. The people who work in financial aid are used to dealing with students in their most panicked, agitated states, and know how to deal accordingly. If you encounter some attitude, take a step back and consider the circumstances. Is it the last day before financial aid applications are due? If so, take a deep breath and put a smile on your face.

That said, these people are here to help you. If you find someone who you particularly like or whose personality fits nicely with yours, stick with them—they could prove to be a valuable resource in times of trouble. You should also feel comfortable approaching them with issues, even those separate from the aid process. They may have access to emergency funds or know of other resources; that’s what they’re there for. Financial aid employees may also know of outside funds for which you could apply, or of cheap ways to get what you need.

What Do I Need My Parents For?

Schools will ask for financial information from both of your parents. Even if you have not spoken to one of your parents in 15 years, schools are still going to want information on their income and assets. This can be a sore spot for some, but don’t stress too much. Schools are generally willing to work with you on this, even if the best you can do is to submit a formal letter saying you are no longer in contact with one or both parents. Even if both of your parents are unhelpful, there is still hope. Be upfront with the financial aid office and see what they are willing to accept. Chances are good that you are neither the first nor the last person to have this issue.

Sallie Mae’s study, How America Pays for College, conducted by Gallup, portrays families’ decisions on how to invest in higher education for 2009-10. Students in this academic year were the first to begin the decision-making process for an academic year in the aftermath of the economic setbacks experienced in late 2008. These setbacks changed the financial circumstances of millions of Americans and have certainly affected families’ approaches and concerns about paying for college. Most strikingly, this year’s families report that they are facing rapidly escalating college costs, are reaching across all funding sources to meet those additional costs, and are very worried about future tuition increases. At the same time, high majorities of families strongly agree that college is an investment in the future and that a college degree is more important now than in the past.

There was no change in the types of funding families used to pay for college; in fact, the way families pay for college is virtually the same as last year. Families just used more from all sources to meet the additional costs. Yet, despite these costs and worries in the aggregate, there is no statistically significant shift in the types of colleges that students are attending, the major determinant of college costs. Instead, virtually all families report taking at least one cost- saving measure and 78 percent report taking two or more. Most families report reducing spending (73%) or increasing work hours or earnings (48%), but a remarkable 43 percent of families report that their student lived at home in 2009-10 to reduce costs.

The report is the third annual Sallie Mae national study conducted by Gallup that examines how families of undergraduate students aged 18 to 24 finance the expenses associated with a higher education. To capture a complete picture of how families meet the costs of college, Sallie Mae and Gallup designed this study to gather data directly from families of the college-going population on their attitudes, aptitudes and actual experiences regarding paying for college. In spring 2010, Gallup surveyed 801 college-going students and 823 parents of such students. This year’s survey provides an improved sample of Hispanic and African-American families to help ascertain whether race and ethnicity influence how families pay for college.

Increasing Costs of College Attendance

The major influence through the entire report is the increasing cost of attending college. The surveyed families report that their costs of attendance have increased 17 percent over last year and 28 percent above two years ago. Families across all income levels faced increased costs except, notably, the lowest-income families, earning less than $35,000 a year. The cost of attendance for those families has stayed relatively flat, perhaps reflecting a trend in this income group to attend two-year public colleges.

Families have met the additional costs by increasing their use of nearly all sources of funding: income, borrowing, use of nearly all sources of funding: income, borrowing,and grants and scholarships. As in prior years, Gallup used the data on funding sources to develop a composite picture of how the average American family pays for college. This year’s study shows that while the cost of college went up, the way families paid for it did not change.

Figure 1: How the Average Family Pays for College: Average Percent of Total Cost of Attendence Paid from Each Source


On average, parents still pay the highest share of college costs, including 37 percent from parent income and savings and 10 percent from parent borrowing. Grants and scholarships remain the second most important source of funding for college, making up an average of 23 percent of college costs. Students borrowed another 14 percent of the bill, and used their own income and savings to cover an additional 9 percent. Friends and relatives paid an average of 7 percent of costs. The pie chart showing the composite of how the average family pays is virtually unchanged from last year. But, with higher costs to meet, the year-to-year comparison shows an upward shift in the average amount families spent in all categories.

Figure 2:Year-Over-Year Comparison of How the Typical Family Pays for College, Average Amount of Total Cost of Attendance Paid from Each Source.



Overall, the percentage of families who used scholarships or grants increased from 51 percent in last year’s study to 55 percent this year, and the percentage who borrowed to pay for college rose from 42 percent to 46 percent.

Economic Concerns and Cost Considerations

Increasing costs and the effects of the economic recession appear to influence strongly parents’ economic concerns and cost considerations. One of the most striking differences from last year’s survey was the sharp rise in parents’ economic concerns.

Nearly half (49%) are extremely worried this year that schools will increase tuition compared to less than one-third of parents two years ago. One-third of parents are extremely worried that their income will decrease due to job loss, up from 23 percent last year. Only 10 percent of parents were extremely worried two years ago that their child wouldn’t be able to find a job, but that has risen to 27 percent this year. Hispanic families are much more worried about almost all factors, with 59 percent extremely worried that schools will increase tuition, 56 percent extremely worried that loan rates will increase, and 53 percent extremely worried that a job loss will decrease their income.

Nearly all families (99%) reported taking at least one measure to make college more affordable and 78 percent reported taking at least two measures. The most common action, reducing personal spending, was mentioned by nearly three-quarters of families (73%). Other money-saving steps differed significantly across racial/ethnic groups. For Whites, the second most reported affordability measure was increasing work hours or earnings (50%). While 52 percent of Hispanics said that they increased work hours or earnings, more Hispanic families (64%) reported that their student lived at home to reduce costs. By contrast, in African-American families, 58 percent reported that their student lived at home, 42 percent used tax credits and deductions, and 40 percent indicated that they increased work hours or earnings. Both African-American and Hispanic families were more likely to choose less expensive schools as a cost-savings measure (33% and 35%, respectively), compared to White families (19%).

This year, more families reported eliminating schools during the college selection process based on cost after receiving their financial aid packages (40% this year compared to 36% last year and 34% two years ago). Overall, 63 percent of families report eliminating colleges because of financial considerations at some point in the application process, compared to 56 percent in 2009 and 58 percent in 2008. Only a quarter of families (26%) strongly agreed that they had a plan to pay for the desired college degree before enrolling.

The Value of Education

Despite the economic pressures of the past few years, parent and student attitudes toward the value of a college education remain very high. Eighty-three percent strongly agree (by rating 5 on a scale of 1 to 5) that college is an investment in the future, virtually unchanged over the past three years. Seventy-one percent strongly agree that a college degree is more important now than it used to be. Sixty percent strongly agree that they will stretch themselves financially to afford college, with parents slightly higher than students in strong agreement, similar to the last two years. Sixty percent strongly agree that they would rather borrow than not go. Fifty-two percent strongly agree that college is worth the cost, unchanged from last year. At the same time, families are looking for a practical return on their college education. Only 32 percent of students and 33 percent of parents strongly agree that they themselves or their children would attend college for the intellectual and social experience regardless of whether more money were earned with a college degree.

Applying for Financial Aid

The study found the percent of families completing the Free Application for Federal Student Aid (FAFSA) virtually unchanged from previous years. Seventy-two percent of families reported completing the application which is necessary to be eligible for federal grants and student loans. Similar to previous years, the lowest-income families are more likely to fill out the FAFSA than the highest-income families (85% for those earning less than $35,000 compared to 50% for those earning more than $150,000). African-Americans (84%) were significantly more likely than other racial or ethnic groups to complete an application. White (71%) and Hispanic (70%) respondents had roughly the same likelihood of completing a FAFSA.

Of the one-in-four families who did not complete the FAFSA, half of them either didn’t think that they would qualify forfederal aid (37%) or were unaware of the FAFSA (13%). Thirty-four percent of them reported that they did not need financial aid.

Read more from the study