If your child is in the junior year of high school, financial aid for college is top of mind, time to make some decisions.
Bottom line: The kids are going to get money for college, almost a guarantee. But, there is one form that kicks off the process.
The form is the Free Application for Federal Student Aid (FAFSA). It's the only time in their lives that kids will get a bunch of money with no job, no credit check, no credit history, no plans for the future, and no questions asked.
From the moment the FAFSA is filled out, student financial decisions are out of the hands of parents and the student has full unilateral control of federal loans.
With one click online, they will be able to borrow nearly $32,000 over the next four years, and even more with optional private loans.
The annual limit is just $5,550 for a Direct federal loan. For in-state tuition and fees at state universities, the cost is about $27,000-$35,000 per year for room and board.
The daunting remainder can be paid a number of ways:
– Pell Grants: Free federal money up to $7,395, calculated on the Student Aid Index (SAI). The lower the number on the index, the higher the Pell Grant. Family income is the biggest driver. Married parents with $80,000 income and one child can still get a partial award. Family size counts toward higher awards. Assets like home equity and retirement accounts generally don't count toward SAI. Automatic full award if collecting Medicaid, SNAP benefits for two years.
– Work-study or summer job: Could contribute from $2,000 to $6,000.
– Parent Plus, a federal loan. Very easy to get and even if you are declined, the student still gets $4,000 to $5,000.
– Private student loans, from $3,000 to more than $30,000, some without cosigner.
– Parent contributions. The majority of students use some sort of parental contributions.
