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Welcome back to Invest in You: Ready. Set. Grow's supplemental Money 101 guide to financial wellness as we emerge from the pandemic.
By now, many high school graduates have committed to the schools they'll be attending in the fall. Yet that education comes with a hefty price tag.
So what is the best way to pay for college and how do you know if you are making the most of what funds are available to you?
We'll wade through the different options, including financial aid, grants, scholarships, student loans, and 529 savings plans.
Thank you for already undertaking your journey to financial wellness. We hope these supplementary lessons help pave the way forward.
Sharon Epperson CNBC Senior Personal Finance Correspondent
Paying for college
Financial aid By now, you should have received your financial aid award letters - colleges typically send them out around the same time as admission offer letters.
However, just because you already committed to a school and received your offer, it doesn't mean you still can't ask for more aid.
In fact, you can apply for additional need-based aid at any time, even through the school year, said Shannon Vasconcelos, former assistant director of financial aid at Tufts University and now director of college finance at Bright Horizons College Coach.
You'll need to show how your financial situation has changed for the worse since you completed your financial aid application. You can also report circumstances the college doesn't know about and ask them to reconsider your aid package.
Common reasons for an appeal include a job loss, high medical expenses, ending child support, increased elder-care or child-care expenses, or income that was inflated by a one-time gain when reported on the financial aid application.
Scholarship money You may also be able to get your hands on more merit scholarship money.
For one, you can try to negotiate with the college. While you are in a much better position prior to committing to the school, there may still be room for negotiation, Vasconcelos said.
Last year, when colleges were worried about the Fall 2020 class, families had success through the summer, she said. While the situation isn't as dire this year, this year was unusual and many are predicting significant movement on waitlists. As a result, colleges may be concerned about losing committed students as they get pulled off the waitlist at their competitors.
"My advice is why not try to negotiate? The worst a college will say is 'no,' and they just might say 'yes!'" Vasconcelos said.
Also, look for grants and scholarships in addition to what the school offers. There are more than 1.7 million private scholarships and fellowships out there, according to higher education expert Mark Kantrowitz.
You can find them on free scholarship search sites, like fastweb.com and bigfuture.com, or simply through Google.
Student loans If you need to take out a student loan to help pay the costs, look at federal loans first, experts say. The rate is low: 2.75% for undergraduates' 2020-21 school year
It's up to the school to determine the loan amount you are eligible to receive each year. However, there are borrowing limits on both subsidized and unsubsidized loans. For first-year undergrads, the subsidized loan limit is $3,500 and the unsubsidized limit is $2,000, bringing the total to $5,500. The total goes up to $6,500 for second-year undergraduates and $7,500 for third year and beyond.
Parents can also take out a Direct Plus loan. The interest rate for loans first disbursed on or after July 1, 2020 and before July 1, 2021 is fixed at 5.30% for the life of the loan.
Finally, private loans are also available through outside lenders, like banks. You can compare different loans on sites like LendingTree's MagnifyMoney and Credible. To get a low rate, you'll have to have excellent credit.
" Yes, your kids should go to school. No, you shouldn't bankroll their degree whatever the cost. " — Suze Orman
529 plans A 529 savings plan is an investment vehicle that allows you to save money that grows tax free. You also aren't taxed when you take money out for qualified expenses.
Those expenses include more than just tuition, room, board, fees and books. You can also use the money for computers, printers, and internet service, as well as graduate schools and apprenticeships.
In addition, you can pay off up to $10,000 of qualified student loans with your 529 funds over your lifetime, and pay up to $10,000 a year for tuition for your child's K-12 private school.
Each state offers a plan, but you don't have to choose the one offered by the state you live in or the one in which your child will attend school.
However, check to see if you get a state tax break by contributing to your own state's plan. In addition, look at the fees that are charged, which will reduce your returns.
The bottom line College certainly isn't cheap. Doing your homework can help you save money or get more aid. If you have some time before you or your child head off to college, try to put money aside.
Saving just $100 a month over 18 years can result in a balance of over $31,000 in a 529 plan, assuming a 6% average rate of return, said researcher Paul Curley of ISS Market Intelligence.
Even starting a 529 account in high school can still help offset some costs. Every dollar you save is a dollar that you won't have to borrow.
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