Heather McDonnell, associate dean of financial aid and admission at Sarah Lawrence College in Bronxville, New York, was shopping at the grocery store a few years ago when a man came up to her and appealed for mercy. A father who recognized McDonnell from a high school presentation she had given wanted to sweet-talk her into handing over a little more cash to cover the college’s tuition, now $49,680 a year.
McDonnell prefers that parents email their appeals, but she can sympathize with that dad’s desperation.
“We’ve been witnessing an erosion of state and federal funding for years,” McDonnell says. Ten years ago, for example, Sarah Lawrence got about $250,000 in Federal Supplemental Education Opportunity Grants for low-income students. By 2014, that figure had dropped to $137,728.
Before you try to knock down the price tag of your child’s dream school, it’s vital to understand the elements of the typical aid package. The first is federal need-based aid, which includes grants, funding for work-study jobs and subsidized Stafford loans – meaning the government pays the interest for you while you’re in school. This aid is determined by your family’s financial information on the Free Application for Federal Student Aid, or FAFSA.
Finally, there are federal loans that aren’t subsidized, for people who don’t qualify for that perk or who need more, and parent PLUS loans for Mom and Dad.
An incoming freshman can borrow up to $5,500 in Stafford loans, of which no more than $3,500 can be subsidized. The limits rise in later years and for students who are independent of their parents. The interest rate on Staffords is now 4.66 percent.
Perhaps you face a challenge not accounted for on the FAFSA form. When Elizabeth Avery’s daughter, Charlotte, was accepted by Union College a year ago, she was thrilled, but there was a problem: Her father’s take-home pay was going to fluctuate over the next few years because of an arrangement with a new employer.
“We may look good on paper, but what we can afford is very different from what the government determined we can afford,” says Avery, a relocation specialist in Pittsfield, Massachusetts. She sent an email to the aid office spelling out the family’s circumstances. Charlotte received a $10,000 merit scholarship that renews every year.
It also can be worth your time to seek scholarships off the beaten path. By searching sites like Fastweb.com, Susan Fregeau, a certified public accountant in Westmont, Illinois, discovered the Laverne Noyes Foundation Scholarship, offered to descendants of people who served overseas in World War I.
“I do genealogy, so I knew where Grandpa fought at that time,” Fregeau says. Her oldest son, Nick, got $5,000 to help pay his four years of tuition at the University of Illinois—Urbana-Champaign. He graduated last spring and is starting law school there this fall. Younger brother Alex, now a junior at the school, received $2,000 from Laverne Noyes for the 2013-2014 academic year.
If you’ve snatched up all the free money you can find and need to fill in the gaps with loans, be aware of the long-term ramifications. Subsidized loans cost less over the long run because the government pays the interest while the student is in school. The government also covers it during the six months after graduation before repayment starts, and during any period of deferment for grad school or a period of unemployment, say.
Congress in 2012 extended low student-loan interest rates but temporarily did away with the grace period after graduation, so students who received direct subsidized loans between July 1, 2012, and July 1, 2014, must either pay interest that accrues then or it will be added to their principal balance.
And as you weigh whether to grab that parent PLUS loan the acceptance letter is offering, you may want to look into cheaper options. The interest rate on PLUS loans is currently fixed at 7.21 percent. Home equity loans are now being offered at an average interest rate of 6.1 percent, according to Bankrate.com, and the interest is deductible.
Guido Castellani III, who received about $200,000 in grants and scholarships to cover his four years at Sarah Lawrence, applied during the early decision round and was accepted, but knew there was “no way” he could afford it. So he scoured the Internet and discovered that as the son of a former Marine officer, a Vietnam vet who passed away in 2003, he was eligible for certain scholarships and other funding.
Castellani, who is originally from Scranton, Pennsylvania, was awarded $10,000 a year from the Marine Corps Scholarship Foundation plus about $950 a month in educational benefits from the U.S. Department of Veterans Affairs.
“I had to be persistent,” says Castellani, who graduated in May. He negotiated with Sarah Lawrence’s financial aid office to get additional aid junior year, and right before he graduated, he applied for – and won – a scholarship from the Children of Fallen Patriots Foundation to cover the $12,000 he’d accumulated in subsidized loans.
His advice for incoming freshmen: “Do your research. The money is there.”
This story is excerpted from the U.S. News “Best Colleges 2015” guidebook, which features in-depth articles, rankings and data.