What is Financial Readiness?
By Julie Sweitzer
College isn’t cheap these days. No question about it. There are options that make college affordable, but it helps to plan ahead.
As a starting point, a student or family can complete a free FAFSA4caster to estimate any federal aid for which the student might be eligible. Doing this while in middle school could provide a welcome surprise for some families. The FAFSA is the Free Application for Student Aid, with emphasis on the word Free – never pay to apply for federal student aid.
Start early, too. Managing money independently is an important skill for college students. It starts with basic budgeting skills, which even elementary students can learn. College financial aid checks can be temptingly large sums of money, so unless a student can exercise restraint to save for future tuition, housing and food expenses, it can disappear too quickly.
While college tuition seems high, there is a tremendous amount of variation between colleges. Two year institutions are usually cheaper than four year, but if a student plans to continue to a four year degree, the student needs to plan to make sure that credits will transfer. Private and public colleges vary in their costs as well, and in the amount of aid they provide to students. The sticker price on a college’s website is only the starting point for comparisons. The true cost of attendance for your student may not be clear until the school admits your student and provides information on any aid they will provide.
Most families cover the cost of college through multiple methods. All financial aid assumes the family will contribute some of the costs, whether it is several hundred dollars or multiple thousands, through savings or student earnings from jobs during college.
Scholarships and grants do not need to be repaid, while loans must be repaid, including interest. Federal and state loans usually have the best interest rates. Loans can be a smart investment, in reasonable amounts. What is reasonable depends in part what degree the student plans to obtain, and the likely salary of jobs in that field. Check out scholarship opportunities available from employers, your high school, community associations and online. They aren’t all based on academics (but tell your child that good grades help!)
Once a student is a high school senior, the FAFSA is available as of October 1. It is worth completing even if a family doesn’t think they will be eligible for federal aid (which is largely based on family income) because many colleges use it as one factor in awarding their aid, including scholarships.
If a family develops a plan to pay for the first year of college, chances are better that the student will be able to complete the degree. Talk with your school counselor early about scholarships and financial aid options, and you will be able to develop a plan that works.
Students in the Ramp-Up to Readiness program, which kickstarts postsecondary planning for students in grades 6 – 12, learn about financial readiness. A recent study of our program indicated that students are learning valuable information that will help them determine a financial plan for college. 85% of respondents in the survey research reported they had a better understanding of what it costs to go to college, while 74% said they had a better understanding of how to pay for postsecondary. We are so glad to hear this because we do not want finances to be a reason a student chooses to not attend college. Want to learn more about the Ramp-Up program from people using it? Watch our video here.
About the author: Julie Sweitzer is Executive Director of the College Readiness Consortium and Ramp-Up to Readiness. Previously she directed the Minnesota Principals Academy and helped create Youth Central, a website that makes it easy to find the University of Minnesota programs and activities that serve K12 students and families. Julie was an elected board member of the St. Louis Park Public Schools for 12 years.
She holds a Masters of Public Affairs from the University of Minnesota’s Humphrey Institute of Public Affairs, and a J.D. from the University of Minnesota’s Law School.