By 2018 the US labor Force is expected to be more diverse with whites making up a decreased share of the labor force. The US economy will also be shifting from a goods producing in favor of service providing industries with healthcare and social assistance, professional, scientific and technical services and Educational Services sectors promising the most growth. Good news is that to fulfill these projections, college enrollment between 2009 to 2020 is expected to increase by 25% for Black and Asian /Pacific Islanders students while the overall number of full and part time college will increase by 11% and by 16% respectively according the US Department of Education.
But who is going to pay for their college education?
For starters, many parents avoid the FASFA and other financial aid forms without realizing what they
have sacrificed.
First generation families that pay for everything in cash have no established credit or savings may not realize that cash is not really needed for college even if they do not qualify for loans. What has made matters even worse is that according to US Census Bureau statistics, poverty is on the rise. In 2010, 15.1% of all persons lived in poverty. 27.4% of blacks, 26.6% of Hispanics and 12.1% of Asians compared to 9.9% of non-Hispanic whites. Annual income thresholds for single parent families with 2 children were $17,568 per year as compared to $22,113 for two parent families.
Failing to complete a FAFSA makes little sense especially if families are unaware that they may qualify for maximum federal and possibly state financial awards under the Automatic Zero EFC Calculation. Parents that file a 1040A or a 1040EZ federal tax return, have combined wages or adjusted gross income of $30,000 or less per year, received at least one of the one of the following federal benefits such as the TANF, WIC, SSI, Food Stamps or Free or Reduced Programs qualify for an automatic zero Expected Family Contribution. Having a tax service complete the long form 1040 tax return rather than the shorter forms 1040A or 1040EZ is another common mistake many parents may not be aware of.
Zero EFC provides students with up to $5500 per year in Pell Grants, low 5% interest Perkins loans, and more in subsidized Stafford loans before any state or need based financial support. The other benefit of the Stafford and Perkins loans is that they are not based on parental credit but on the student’s financial need.
Although the US Dept. of Education recently announced that the FY 2009 national cohort default rate increased to 8.8% up from 7.0% in FY 2008 with the greatest increase of from 11.6% to 15% at for profit schools. The bad news good news is the potential negative impact on a student’s potential borrowing. The good news is that the new IBR (Income Based Repayment) option caps makes repayments more affordable by capping monthly repayments based on income and family size.
What about needy parents that exceed the zero EFC thresholds? Their biggest mistake is failing to appeal a financial aid award and or trying to figure out the angles that may not work. Colleges should encourage appeals but make parents more aware of how to succeed and explain the PJ or Professional Judgment Process and the latitude they have in adjusting the reportable numbers. In other words, colleges have the power to make changes based on facts that may not be reflected in the FAFSA. On the other hand, parents may be doomed to failure or place their child’s education at risk by under reporting income that does not agree with the tax return. Students may also be eligible for up to $4000 in additional Stafford loans if parents apply and are denied a federal parent PLUS loan.
Realizing that they now have up to $5500 in Pell Grants, $5500 Stafford (plus $4000 for a PLUS loan denial) parents may show a sigh of relief when considering that the average cost of a public two-year college. Is about $2700 and well within their means.
During the summer and into the school year, colleges are also trying to provide free on-site mentoring and remedial programs day and night.
Many colleges offer rolling admissions, work study and co-op programs in which the student can gain experience and pay college costs simultaneously. Many employers can also provide educational assistance support and bring the campus to the worksite to educate many employees at once at little or no cost,
Despite offers to guaranty future employment, only 22 percent of first time, full time students seeking bachelors degrees from for-profit colleges graduated within six years as compared to 55 percent graduation rate at public institutions according to the Washington-based Education Trust. Although the Obama administration is taking steps to limit funding to and increase regulation of for-profit institutions, parents need to compare the cost and value of a two-year program at a community college, military program and other low-cost options before borrowing more than they can afford.
The bottom line is that parents need to be better educated about paying for an education before the student continues their education. In turn, a combination of becoming better informed and more creative will make the cost of education more affordable.
Howard Freedman is president of Financial Aid Consulting. He can be reached at finaidman@comcast.net. His website is www.financialaidresults.com