Paying With Less Pain

There's Still Time For Students To Improve Their Chances Of Earning An Affordable Degree

(CBS) 


Driving for dollars. If the out-of-pocket costs for the student's top choice look too high, it can't hurt to appeal for more aid. "But don't use the term negotiate," warns Don Betterton, the former director of Princeton's financial aid office. Do it in person, if possible, Betterton recommends. "That is much more effective than a letter or E-mail." And if you have a chance to increase your aid by $4,000 or $5,000, that's worth the trip. Bring as much documentation for your case as possible, he says, including reasons that the family can't afford the expected contribution, any new achievements that make the student a great catch for the school, and better offer letters from competing schools. Sweeten the message with a little (honest) flattery by emphasizing, "You are our first choice," Betterton advises.

Don't build your hopes too high, though. Only about half of all appeals result in higher awards. Thus, even families who've done everything right usually have to come up with several thousand extra dollars to cover the student's freshman bills.

Extra money. If the amount of money students earn or borrow themselves isn't enough, parents can also find clever ways of raising cash on their own. Low- and middle-income families should take advantage of tax programs such as the Hope Scholarship and Lifetime Learning credits of up to $2,000.

Many parents are pleased to discover that when their child moves out, grocery bills can drop, freeing up money that can be contributed to tuition. A student who doesn't take a car to college and who asks to be listed on the family's insurance policy as an "occasional driver" of the household's least expensive car can also save a couple of thousand dollars.

Unfortunately, these steps are rarely enough. Most families can cover tuition only by tapping savings and borrowing. There are strategies to make these options less painful, however. Spending down education and savings accounts can reduce assets that might have stopped the student from getting need-based aid. Retirement accounts shouldn't be tapped, because of tax penalties.

PLUSes and minuses. Parents willing to borrow to fund their child's education have two lower-cost choices. The federal Parent Loans for Undergraduate Students (PLUS) are capped at 8.5 percent, though adding fees as high as 4 percent of the total debt means the maximum annual percentage rate can top 9.4 percent. Some lenders, however, such as the Missouri Higher Education Loan Authority (mohela.com), offer discounts. PLUS loans are good options for middle-class families or those who don't have home equity to tap. Families earning less than $135,000 can qualify for the education interest tax break. And PLUS loans are canceled if the parent or student dies. But for anyone who earns too much to take the education tax deduction and has home equity, leveraging a home can be a cheaper option. Mortgages can be fully tax deductible.

When all else fails. Naturally, many parents have good reason to be leery of hocking their houses, so students facing out-of-reach college bills have to consider other ways of cutting costs. Living at home and attending a community college for the first two years can save tens of thousands of dollars. Alternatively, students can spend their free time studying for the College Level Examination Program or DSST. Good scores qualify students to get credit for-and thus potentially skip-a semester or two. It can be a real grind to spend the summer studying and taking tests. But that work and the $300 to $400 in fees for five tests could save an entire semester's tuition.

Studying hard, long the key to a more valuable college education, is increasingly also the ticket to a more affordable degree.

Explaining the complicated world of financial aid is a top priority for U.S. News's Web site. You can research college costs, calculate savings, and post questions to a forum

Tip. You fill in your FAFSA, and the replies flood back, but they're full of jargon. The next step? Financialaidletter.com helps make sense of them - with examples of real letters.

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