A r c h i v e d  I n f o r m a t i o n

Preparing Your Child For College: 2000 Edition

What are the most common sources of financial aid?

Student financial aid is available from a number of sources, including the federal government, state governments, colleges and universities, and other organizations. Students can receive aid from more than one source.

Federal Financial Assistance

The federal government supplies the largest amount of all student aid, about 75 percent or $35 billion annually. The largest and most popular Federal student aid programs are:

More Information on Federal Aid

Students can get aid from more than one Federal program. For the most up-to-date information about student aid supplied by the federal government, call the Federal Student Financial Aid Information Center toll-free at the U.S. Department of Education at 1-800-4FED-AID. You can also obtain a guide to federal financial aid for students, called The Student Guide, which provides an extensive and annually updated discussion of all federal student aid programs. You can obtain the Guide by writing to the following address:

Federal Student Aid Information Center
P.O. Box 84
Washington, DC 20044

Or call: 1-800-4FED-AID

State Financial Assistance

States generally give financial support to public colleges and universities. This support lowers tuition for all students attending these schools. Some states also offer financial assistance directly to individual students, which can be need-based or merit-based. To find out about state aid where you live, call or write your state's higher education agency. The phone numbers and addresses of all of these agencies are listed in the last section of this handbook.

College/University Assistance

Colleges themselves provide aid to many of their students. Most of this institutional aid is in the form of scholarships or grants. Some is need-based and some is merit-based.

When your child wants financial aid information about specific schools, he or she should contact the financial aid offices of these schools and request information.

Other Types of Assistance

Other organizations, such as corporations, labor unions, professional associations, religious organizations, and credit unions, sometimes award financial aid. You can find out about the availability of such scholarships by contacting someone from the organization or by directly contacting its headquarters.

In addition, some organizations, particularly foundations, offer scholarships to minorities, women, and disabled students. To learn more about such scholarships, go to the nearest public library with a good reference section and look for directories that list such scholarships. (The names of a few books that list scholarships appear in the last section of this handbook.) College admissions offices and high school guidance counselors should also be able to provide more information about scholarships.

Help in Getting More Information

The guidance counselors at your child's high school should be able to provide information on when and how to apply for federal, state, and other types of aid. If they cannot give you this information, try a local college. Even if your child doesn't plan to attend that particular institution, financial aid officers there should have information on federal financial aid. Many colleges can also tell you about state aid and their own institutional aid.

Is my child eligible for financial aid? If so, how much?

To qualify for federal aid, you or your child must submit a financial aid application. Applications for financial aid request information about your family's income, savings, and assets, as well as information on the number of children in the family who are in college. You can get a copy of the federal financial aid form by calling the toll-free number that was mentioned earlier: 1-800-4FED-AID. You may also fill out this form via the World Wide Web. Visit the Department's web site at: www.ed.gov and click on "Student Financial Assistance."

To apply for other aid in addition to federal aid, you may need additional forms. High school guidance counselors can tell you more about applying for financial aid, including where to get forms you might need for state aid.

From information you report on the financial aid forms, your expected family contribution (EFC) is calculated. The EFC is the amount of money a student and his or her family are expected to contribute to the costs of attending college. Using the EFC and other information that you provide, each college to which you apply will determine your financial need. Financial need equals the cost of education minus the EFC and represents the maximum amount of need-based aid the student can receive. In addition, students can borrow money to cover the EFC.

Because financial aid determinations consider both financial need and education costs, you should not rule out a school because you think it costs too much. In fact, with financial aid it may cost no more to attend an expensive institution than a cheaper one. Chart 8 below summarizes the simple calculation that is performed to determine financial need.



How Much Need-based Financial Aid Can My Child Get?

The amount of need-based financial aid a student qualifies for depends on his or her financial need. Financial need is equal to the cost of education (estimated costs for college attendance and basic living expenses) minus the expected family contribution (the amount a student's family is expected to pay, which varies according to the family's financial resources).

Cost of Education

Includes costs of
Expected Family Contribution

Based on the financial resources of a student and his or her family
Financial Need

Students can receive up to this amount of need-based financial aid, such as Pell Grants and Stafford Loans.


To give you a better idea of how you can finance your child's college education, examples of two college students' financial aid packages are shown below.

Note that these financial aid packages are just examples of the kinds of packages that students with these profiles might receive if they attended the schools described below.

Profiles of student financial aid.

Tax credits, deductions, and deferrals

In addition to any student aid awarded to a student, families may be eligible for tax credits, tax deductions, or tax breaks on savings plans. These are not the same as student aid but may make college education more affordable by reducing the amount of taxes that would otherwise be owed.

Tax credits directly reduce the amount of taxes owed to the federal government. There are two types of tax credit programs. The first is called Hope Scholarship and can provide up to $1,500 for a child's first and second years of college. The second is called the Lifetime Learning tax credit and can provide as much as $1,000 a year after the first two years of college. The actual amount of the credit depends on the amount of college expenses and on parent or student income. Parents can take the tax credit if they claim the student as an exemption on their return. The student can take the tax credit if he files a separate return and claims himself as an exemption.

When deciding about student loans, student should also remember that some of the annual interest payments may be deductible on their tax returns during the first five years of loan repayment.

The federal government also encourages families to save in advance for their education by allowing taxes to be deferred or forgiven on accumulated earnings. One provision is the Education IRA or individual retirement account. This allows total contributions of not more than $500 a year to the account of a child under 18. These contributions cannot be deducted from taxes. However, the taxes on the earnings in the account are deferred. If the withdrawals from the account are used for qualified higher education expenses, the student will not owe any tax on the accumulated earnings.

Certain states and agencies also have programs that allow people to buy credits or certificates or make contributions to accounts that can be used to pay higher education expenses. These programs are usually referred to as state tuition programs or pre-paid tuition programs. The contributions are not tax deductible but the earnings from the accounts are not taxed when used for higher education expenses.

Many families have used EE savings bonds as a way to accumulate funds for college. The interest on these bonds, if they were used after 1989 and used to pay qualified college expenses, can be excluded from gross income on your tax return. This exclusion depends on the family's income and other financial aid and tax benefits that the student or parents may have received.

Eligibility for tax credits, deductions, and deferrals involves complex rules and calculations. You should seek the advice of someone who has experience with these provisions. You can also read IRS Publication 970, Tax Benefits for Higher Education.

Are there other ways to keep the cost of college down?

Serve in AmeriCorps

AmeriCorps is a domestic service organization in which thousands of young men and women are working in community service projects around the country in exchange for a living allowance averaging $7,500 per year; health care; child care when needed; and an education award of $4,725 per year for paying back a student loan or for financing postsecondary education. Under some circumstances a person can serve part time and receive an education award of $2,362 per year.

AmeriCorps projects serve communities throughout the country. All meet at least one of four national priorities: (1) education; (2) public safety; (3) human needs; and (4) the environment. For example, AmeriCorps members teach state-of-the-art computer skills to teenagers, tutor grade-school children in basic reading, or organize innovative after-school programs in some of the education projects. AmeriCorps members in environmental projects clean up urban streams and inland waterways, monitor dangerous trends in air quality, or test-start city-wide recycling programs.

There are many different points in a person's educational career when participation in AmeriCorps is an option: right after high school; during or after college; and during or after graduate school or occupational training. AmeriCorps members are recruited locally and nationally. To find out more about AmeriCorps, call the AmeriCorps Hotline free of charge at 1-800-94-ACORPS (1-800-942-2677) or TDD 1-800-833-3722. You may also visit the AmeriCorps web site at: www.americorps.org.

Take Advanced Placement (AP) Courses and Exams in High School

As discussed in an earlier section of this book, many high schools offer Advanced Placement (AP) courses and exams. AP courses are college-level courses that help students prepare for college-level work. After taking AP courses, students can take AP exams offered in the same subjects as the AP courses. If students score a grade of 3 or higher on an AP exam, they can often receive college credit. Students with high grades on AP exams in many different subjects are sometimes granted a full year of course credit at the colleges where they enroll. The receipt of course credit can result in savings in college costs. These savings can be quite large if it means that a student is able to enter into a college as a second-year student; such a student might save the cost of tuition and fees for a whole year of college.

However, not all colleges and universities give college credit for a grade of 3 or higher on an AP exam. Contact your child's high school to find out if AP courses and exams are offered. Write to the admissions office of the colleges that are of interest to your child to find out if they give credit for an AP exam grade of 3 or higher. For more information on AP courses and exams, see the address and phone number in the last section of this guide.

Participate in a Career-Focused Educational Program such as "Tech-Prep" or "School-to-Career"

As discussed earlier, some high schools offer career-focused educational programs that provide students with a set of high school courses that are formally linked to courses offered at local community or technical colleges. These "tech-prep" or "school-to-career" programs, as they are often called, offer students the opportunity to go through a sequence of career-focused courses in high school that prepares them for an apprenticeship program or for a specialized sequence of college courses in a particular occupational field. Thus, students who master certain technical and occupational skills and knowledge in high school do not need to repeat the same courses when they enter college or an apprenticeship.

In some of these programs, students who take the specialized sequence of courses in high school can sometimes be awarded college credit or advanced standing in the occupational program at the college level. This can save students time and money. It also means that students can gain access to more advanced college courses much earlier in their college careers. To find out if such career-focused programs exist in your community, ask your child's guidance counselor or teacher, or staff at a local college. To learn more about career-focused programs like tech-prep and school-to-career programs, contact the organizations listed in the last section of this guide.

Enroll in a Two-Year College; Then Transfer to a Four-Year College

Local community colleges are usually the least expensive. In addition to charging low tuition, usually it is possible to save money by having the student live at home and commute to campus.

After completing an associate's degree or certificate in a two-year college, students often can transfer to a four-year college and work toward a bachelor's degree.

If your child chooses this route, he or she needs to take courses in the two-year college that will count toward a bachelor's degree. Certain community college courses may not be transferable to a four-year institution. Community college admissions officers can explain transfer terms and opportunities.

Work Part Time

Some students choose to work part time and attend college part time. If your child wishes to do this, he or she should make sure that work, classes, and time for studying do not conflict. Some institutions offer programs that enable students to combine work and classes. Although going to school part time is a good option for many students, it usually takes longer for part-time students to earn their degrees.

Take Advantage of Armed Forces Education Programs

All of the ways to get postsecondary educational training through the armed forces are shown in Chart 9 below. The armed forces offer educational programs during or after active duty. If your child prefers to work toward a college degree immediately after high school, attending one of the military academies or attending a civilian school and enrolling in the Reserve Officers Training Corps (ROTC) program are options. If your child wants to join the armed forces before attending college full time, he or she can attend college after military service by taking advantage of the Montgomery GI Bill or by obtaining college credit for some of the military training he or she will receive.

Military Postsecondary Education Opportunities

   --------------------------              --------------------------    |                        |              |    Reserve Officers    |    |  Military Academies    |              |     Training Corps     |    |                        |              |        (ROTC)          |    --------------------------              --------------------------                        --------------------------               =========|     College Courses    |=========              ||        |  While on Active Duty* |        ||              ||        --------------------------        ||    --------------------------              ---------------------------    |                        |              |   Montgomery GI Bill    |    |    College Credit      |==============|  (Offers College Funds  |    | for Military Training* |              |    After Active Duty)*  |    --------------------------              --------------------------- *These options are not mutually exclusive.

Local armed forces recruiting offices can provide detailed information about education opportunities through the military.

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