Tuition Costs and Your Wallet: Are You Eligible for Financial Aid?

financial aid

Investing in your education can boost your earning capacity, even if the value of your education doesn’t become obvious when you first graduate. Determining the impact of tuition costs might seem a bit daunting, however. “The key to maximizing your investment is navigating financial aid,” says Jason Steele, a certified college planner in Raleigh, North Carolina. Here are some tips to get you started.

Education Costs: Public vs. Private Education

Getting your college education at a public four-year school costs approximately $8,655 a year and $3,131 at a public two-year school as of publication, according to College Board, a New York City-based nonprofit group that studies higher education. Go east to New Hampshire or Vermont for school, and you’ll pay almost twice the national average; go west to schools in California, New Mexico, Utah or Wyoming, and you’ll find four-year and two-year institutions at half the national average. That same education from a private college or university costs approximately $32,617 for a four-year college and $23,871 for a two-year private college, according to 2012 data from the U.S. Department of Education, National Center for Education Statistics.

Considering Financial Aid

Invest the time and research into options for financial aid, and you’ll find thousands of dollars available in scholarships for practically every category of students. In addition, the research arm of the U.S. Department of Education, Federal Student Aid, says that many students qualify for grants, loans and work-study benefits for virtually any kind of education, whether it’s graduate studies or trade school. Determining your eligibility for financial aid is the first step and, for many of the financial-aid resources, it’s based on how much you need it. A peek at your wallet gets you started on the eligibility test, but your overall budget and expenses will tell you how much you can receive.

FAFSA Eligibility Standards

The federal government uses the Free Application for Federal Student Aid, or FAFSA, to determine your need and eligibility for financial aid. One of the factors used in the FAFSA determination of your eligibility is what it costs to attend the schools you list on your application. What FAFSA calls the cost of attendance, or COA, depends on direct and indirect costs. If you don’t plan to live on campus or if you already have housing, your COA is probably going to depend only on direct costs, which include such expenses as books, school fees and tuition. The FAFSA then looks at your financial information to calculate what’s the reasonable amount you can contribute to your schooling. This is called your expected family contribution, or EFC. The amount of financial aid for which you could be eligible depends on the difference between your COA and EFC. The calculation is simple: COA minus EFC equals “Student Need.”

PROFILE Eligibility Standards

Applying for financial aid at private colleges and universities can involve more scrutiny into your financial need and circumstances. This is because private schools are allowed to dig a little deeper than the FAFSA. The application for non-federal financial aid is called CSS/Financial Aid PROFILE. There are two key differences between FAFSA and PROFILE. The first is that there is a charge to fill out a PROFILE: $25 for a report from a single college and $16 for additional reports, as of the 2013-14 academic year application. Another key factor, more important than the cost to fill out the PROFILE application, is the method it uses to determine what you’re eligible for, which is called the “institutional methodology,” or IM. You could be awarded more from a private institution, based on the IM, which determines how much the school has to offer, and the methodology gives financial aid professionals more leeway to say how much you can receive. With endowments and private funding, private schools often offer more school-specific awards. Information collected on your PROFILE application is similar to that on your FAFSA, but the resulting eligibility amount to which you could be entitled may be higher.

Deciding Factors: Public vs. Private School

Based on your choices, your wallet and what you have to spend, it looks like a public college or university is the obvious, more economical choice. That’s not quite a no-brainer, however. “It’s more than just tuition and fees that should help you choose a college or university,” Steele says. “One of benefits of choosing a private school is that graduates from private schools tend to get better job interviews and career prospects — that’s because of the prestige attached to private institutions. There are obviously benefits to either choice. However, if you’re looking for options where your choices of financial aid are likely to make you have a lower investment, consider a private school.” Financial aid for public institutions can include federal and state grants, work-study programs and, of course, loans.

For private institutions, you can receive financial aid through the same federal resources, but there are additional options to receive aid through private school endowments and grants. In addition, a May 2013 Wall Street Journal article titled, “Colleges Cut Prices by Providing More Financial Aid,” indicates that the “tuition discount rate” that private colleges offered is nearly one-half the cost of tuition — 45 percent — while the discount rate offered by public institutions dropped in 2012.

Says Steele: “These private school endowments can result in much lower tuition costs than the cost to attend a public institution, without having to rely on student loans. Here is how navigating the art of financial aid becomes critical in choosing a school.”