It's that time of year. The time of year where families are receiving college acceptances and financial aid packages for their seniors. They are giddy with excitement and getting ready to place their deposits by May 1. The dark side? They have NO idea how they are going to pay when the bill comes due.
I get a lot of calls this time of year. Parents are asking how to get additional scholarships, where to find the best loans, and whether they can negotiate financial aid. At the end of the day, sometimes it comes down to the fact that they simply cannot afford to send their child to their desired school.
This is a tough pill to swallow. Often their children have worked extremely hard to get into a school. They've sacrificed throughout high school. But this isn't a reason to risk your financial future.
The Truth About Outside Scholarships
Outside scholarships only account for about 15% of scholarship dollars that are awarded annually. Often they are for small dollar amounts (think $1,500), are only for one year, and deadlines have already passed by this time of year.
The other problem is that even if you are awarded these dollars, they have to be reported to the school. The school can then recalculate your financial aid package based on them, and could reduce your financial aid.
Borrowing for school - how much is too much
I'll be blunt - there is no undergraduate program worth borrowing $100k to attend. My rule of thumb is that the STUDENT shouldn't borrow more, in total, to attend school than the projected first year salary for the major they will graduate in. For teachers it's going to be lower than for computer science majors.
The good thing is that the Federal Direct Student Loan programs cap the amount the student can borrow - both per year, and in total. A student can't get into too much trouble taking out these loans, but they still need to understand what borrowing means, their responsibility, and figure out how they are going to budget to pay them back when they graduate. It's actually good for them to have some skin in the game and helps them build credit history when they make payments.
Parent and private loans are another thing entirely. If your family is considering borrowing more than a SMALL amount through these avenues, the school is NOT AFFORDABLE for your family. It's just NOT. It is not worth jeopardizing your financial future to send your child to a particular school.
negotiating financial aid
Parents ask me about negotiating financial aid. It is possible to ask a school to reconsider their financial aid package. It doesn't hurt to ask.
The times I have seen this be successful are when a student has financial aid awards from two competing schools. Almost always these are private schools with more leeway in how they award aid.
Ask the school with the lower award if they could increase the award by $X. However, you need to be prepared to say that with that extra award, your child will definitely commit to that school. If the awards are light-years apart - think $25,000, you aren't likely to get that much extra from a school. It's just not going to be affordable for your family.
It sucks to have to give parents this news. I would much rather be optimistic and help them find a way to pay. Sometimes I can do that. Other times I can't. I'm very passionate about helping families make smart financial decisions about paying for college, though. If you have questions, please reach out!