An Investment in Your Future: Funding Your Undergraduate Education Through Federal and State Sources

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In 2006, the average annual cost of attending a four-year private college or university (tuition plus room and board) was approximately $24,000 per year, or just shy of $100,000 for the complete four-year experience. Of course, that's just the average. The annual cost at some of the most selective schools in the country is nearing $50,000 per year. The news is somewhat better at the average four-year public university, whose annual cost tops out at around $12,000 per year.

Because you probably don't ordinarily go out and blow a hundred grand on a whim, you are going to need to take some time to figure out how exactly it is that you plan to pay for college. A proper treatment of this subject could consume an entire book by itself (and there are many good ones available to you), so we won't try to reinvent the wheel here. What we're going to do in the next few pages is simply give you a view of the financial aid landscape, explain in clear language the different sources of financial aid to you, and then direct you and your parents to the necessary resources to take care of the financial aid component of your application in a timely and effective fashion.

Sources of Funding

The good news is that there are a number of sources of funds available for college students. Absent a personal fortune or a benevolent relative, your funds for tuition and expenses will likely come in the form of a combination of loans, grants, and scholarships. In 2006, well more than half of all students applying to college received some form of financial assistance, with the average student saving as much as 40 percent on tuition and fees. The average aid award given by each college and university is typically available for review on the college's Web site or in their application materials. As you compile the list of schools to which you intend to apply, you should gather this data for your parents so they will have some idea of what the cost burden of attending each school is likely to be.

In general, financial aid can be divided into three categories: (1) gift aid; (2) student loans; and (3) work-study programs. Gift aid, such as grants and scholarships, is clearly the best type of financial aid to receive, for as the name suggests, it is a "gift" from the source, which does not require you to pay it back. Student loans, which come in several forms, do require you to pay the money back, but can generally be deferred until you complete your education and actually start earning money, offer favorable interest rates, and are widely available such that almost anyone with a decent credit rating can qualify to borrow money under these programs. Finally, work-study programs provide you with jobs on campus (such as washing dishes in a dining hall or manning the help desk at the library) for an average of ten to fifteen hours per week. Depending on the school, the income the student earns from the work-study job is either directly credited against the student's tuition bill or simply given to the student in the form of a paycheck. (The student is expected to use the funds to pay for college-related expenses.)

FAFSA, The CSS Profile, and Other Forms

The U.S. Department of Education has created the Free Application for Federal Student Aid (FAFSA) to determine individuals' eligibility for the various federal student assistance programs. Each year, the FAFSA form is made publicly available in November or December. You can obtain a paper version of the FAFSA application from school financial aid offices, or you can download it from the government Web site (www.fafsa.ed.gov). FAFSA Express software, which allows you to transmit the application electronically, is also available. The FAFSA can be submitted any time after January 1 of the year that you intend to begin school. Send it in as soon as possible for priority consideration.