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5 Ways to Make College More Affordable

The value of a college degree isn’t what it used to be, but its importance certainly hasn’t diminished. In fact, in Sallie Mae’s report, “How America Pays for College,” 90% of families expect their student to earn at least a bachelor’s degree, with 54% expecting a graduate degree. Of course, if you’ve read any recent news about the financial details of college education, you’ll know that it’s also a foreboding prospect: there is nearly $1.3 trillion in total U.S. student loan debt, ongoing wage stagnation, and the prospect of enduring years of underemployment.

But it’s not all bad news. A notable paradigm shift is taking place: this year, a whopping 98% of current students are actively engaging in ways to make their education more affordable.

So how does a student and their family better prepare themselves? Here’s our list of the top five ways families can make college more affordable:

5 Money-Management Musts for New Grads

by Center for Personal Finance editors

McLEAN, Va. (5/19/15)—This spring will bring a lot of "firsts" for many college grads including first jobs and first paychecks (USA Today May 4).

In the months after graduation, financial experts agree on five things every new grad should be doing with his or her money:

• Create a spending plan. Understanding how much money you have coming in as well as going out is the first step you must take in keeping a successful budget. Become familiar with the difference between your gross pay and net pay so you know what you'll actually have left to live off of after monthly financial commitments.
• Pay yourself first. Start saving in an emergency fund—even if you only can stick a minimal amount aside each paycheck, that amount will add up quickly.
• Develop a student loan repayment plan. Understand financial obligations and how long it will take you to pay off debt. Get up to speed on details about your loan and pay attention to interest rates. Visit your credit union for information about refinancing or other student loan repayment options.
• Understand company benefits. Once you get a job, make note of important dates such as deadlines for signing up for health insurance and when you'll be eligible to participate in your company's retirement plan. Also become familiar with your company's vacation policy, corporate discounts, public transportation benefits and the like.
• Start investing in a retirement plan. Whether you open an individual retirement account (IRA) at your credit union, or a 401(k) through the company you work for, start saving for retirement now. It probably seems like retirement is so far away that you don't need to worry about it yet, but now is when time is on your side and the benefits of compounding interest are highest. If your company offers to match your contributions to your 401(k), contribute at least the amount you need to in order to get the match. If you don't, it's like leaving free money on the table.

Understanding College Financial Aid Awards

by Judy Dahl

Helping your son or daughter choose a college is a complex process. Your student likely applied to several schools and completed the Free Application for Federal Student Aid (FAFSA) to see, based on your family's income and expenses, what you're expected to pay out of pocket for his or her first year of college. That amount is called the expected family contribution (EFC).

Each college that accepts your student sends a financial aid award letter that specifies what federal and institutional grants, institutional scholarships, federal loans, and work study funds your son or daughter would receive for attending that school freshman year. Be aware that financial aid offers might expect your family to pay more out of pocket than your EFC specifies. (See sidebar for definitions).

You compare the letters to determine which school is offering the best award package so you can make an informed decision about which college to attend. Sounds simple, right? Well, not really.