Paying for college can be more stressful than getting into college — and the way schools explain their aid packages doesn't always help.
Student loans can be labeled as "financial aid" and subtracted from the amount you have to pay, even though you'll pay them back later. (If you're trying to decode a specific financial aid letter, see our interactive guide.) The amount a family is expected to contribute is shockingly high. And to really understand an aid package, you have to ask a few important questions — even if the answers aren't clearly advertised.
1) How much of my financial aid package is loans or work-study?
There are three kinds of financial aid: grants, loans, and work-study. Grants can come from colleges, states, or the federal government. They might be labeled as scholarships, and they don't need to be paid back.
But student loans also count as a form of financial aid, because they provide immediate help in paying tuition bills and because interest rates on federal loans are generally lower than they would be on the private market.
Some financial aid offers lump grants and loans together, making it look like you have to pay less than you actually do. The most important thing is to separate out the grants, then figure out how much of the tuition you're responsible for, whether you're paying from savings or investments or through loans and work-study jobs.
2) What do I have to pay for that isn't included in tuition, room, and board, and other direct costs?
Colleges should separate out direct costs — money that students owe to colleges for tuition, room and board, and so forth — and indirect costs, such as transportation and textbooks, on their financial aid forms. Look for that part of your financial aid letter to understand what a year of college might really cost you, even if it's not included in the bill. Then think about your own financial situation: Do you live far enough away that flying to and from school might cost you $1,000 per year? If you're a commuter student, what will you be spending on gas?
3) How much debt am I willing to take on — total?
Don't tackle student loan debt on a year-to-year basis, says Justin Draeger, president of the National Association of Student Financial Aid Administrators. Borrowing $10,000 for one year might not seem daunting, but do it every year (and many students take more than four years to finish college) and you're looking at a bill of $40,000 — plus interest.
Draeger suggests you set a total amount of debt that your college degree is worth to you, and stick with it. "Sometimes folks aren’t really sure, so they sort of go into it and accumulate as they go," he says. "What we’ve seen from a lot of students is they get too far down the road, and they’ve accumulated much more than they ever thought."
To get an idea of how much you might have to borrow, the Education Department's College Navigator lists the average amount students borrow annually. College InSight, a database from the Institute for College Access and Success, has total average debt at graduation for many colleges and universities.
4) Can I get these grants and scholarships next year, too?
Like a teaser rate on a mortgage, some colleges front-load scholarship offers freshman year to bring down the price — and students are surprised when the price for sophomore or junior year is higher.
Colleges should be up front about whether grants and scholarships are renewable, and if there are any expectations of students, like a minimum GPA, Draeger says. And if that information isn't included, you need to ask about it to get the best idea you can of the total price over four years.
Financial aid offices don't have the final say over tuition rates. And particularly at public colleges, where funding depends on state legislatures, there's not always a way to know if tuition is going to go up dramatically. But colleges and outside groups that offer grants and scholarships should at least be able to tell you if they'll offer you the same amount of financial aid next year, too.
"Schools aren’t trying to do a bait and switch, but students might feel that way when in subsequent years they don’t get the same award," Draeger says.
5) What happens if I take time off or drop out?
If you take a semester or year off — whether for work opportunities, because of health issues, or anything else — be sure to find out what happens to your financial aid. And if you drop out, it's possible that you might have to repay some of your aid. Federal grants for prospective teachers, for example, turn into loans if students don't meet the conditions of the grant.
6) What's a reasonable amount to expect to make after college?
There is no right amount of student loan debt. It's possible to borrow too little, like if you're working to afford college and don't have the time and energy to devote to your studies. The most important thing is to understand what you expect to be able to afford when you have to start paying the loans back.
If you're keeping a running total of how much you're taking out, or how much you might take out, student loan calculators give you an idea of what your monthly payment will be. Some colleges and states also provide information on their graduates' salaries: Virginia, for example, has an extensive database of postgraduate earnings, sorted by college and by program. There are many flaws in using salary data to evaluate the quality of a college education. But it's a reasonable way to get an idea of whether you'll be able to repay your loans.
7) Should I negotiate?
Every financial aid package includes an "estimated family contribution" — the amount a family is expected to pay for college on their own, based on income. Often, that number can seem way too high.
The financial aid office knows the estimate isn't always realistic, Draeger says. It represents the best a college can do with the amount of financial aid they have. "Particularly with need-based aid, there’s a feeling like most people expect there to be more," he says. "There generally just isn’t enough money to meet all the real need that exists."
If your financial aid is mostly need-based, and particularly if it comes from the federal government, you probably aren't going to get much more unless you can show that your application wasn't a good reflection of your financial circumstances.
But much financial aid isn't need-based — it's meant to encourage students to attend one college rather than another. It could be based on academic or athletic talent or even on family income. If your first-choice college isn't offering you as much as your second or third choice, it's worth figuring out if your aid is need-based, which might require a call to the financial aid office — and asking for more if it's not.
"I would never discourage a student from going back and saying, 'I’m looking for some additional aid,'" Draeger says. Colleges don't always like being played off one another, but the worst they can say is no.