How Do People Afford College Really?
No other costs rise faster than college costs. In fact, student debt is the second largest consumer debt after mortgage in the USA.
And it’s not surprising that according to a recent survey conducted by the National Opinion Research Center (NORC) at the University of Chicago, up to 75% of Americans believe that people do not pursue higher education because they cannot pay for college.
Just how do current undergraduate students afford it?
More than 80% of today’s undergraduates get the help of their parents to pay for college. A little over half of them receive federal aid, while almost half receive grants from their respective schools. Some take out federal or private loans, while others work — about 40% of full-time undergraduate students do.
There are different ways different average students fund their undergraduate education. In most instances, many rely on multiple methods all at once just to be able to stay in school.
You should know about all options below even if you do not qualify now.
Unfortunately, the economy is changing so fast that you may qualify for some aid later. Also, I will be pointing to some resources that may help tackle rising tuition.
Federal Financial Aid
When October 1 strikes, there’s a very important step every college-bound or college-level student, including especially someone who is from a low-income family, should do: complete the FAFSA form.
It’s during this time of the year when it becomes available online.
Generally speaking, the sooner that you fill out and submit the FAFSA, the better. That’s because some form of federal aid is given out on a first-come, first-served basis.
States and colleges can only award so much aid. In most instances, undergraduate students receive more aid the earlier they carry out the filing of FAFSA.
Submitting the FAFSA form on time is just as important as completing it ahead of everybody else. The following are the 3 deadlines students should keep in mind if they need money for college:
More often than not, the earliest deadline for the submission of the FAFSA form is set by colleges and universities themselves. The date can differ from school to school but it’s usually before the academic year begins.
Some institutions require FAFSA filing on October 1, the very same date that the form becomes available online!
It’s not uncommon, too, for some schools to have a priority deadline.
Especially if you could use all the cash awards you can get to fund your higher education, it’s of utmost importance to submit your completed FAFSA form on or before the said deadline — it’s key to potentially receiving the most money from the college.
Each state has a different deadline for filing the FAFSA. Some have hard deadlines, while others have suggested dates in order for students to get considered for college aid.
There are some states that require residents to submit their FAFSA forms as soon as possible after October 1.
In most instances, it’s because the funds available are limited and that students should complete the FAFSA ASAP if they want to get the most amount of cash award possible from their home states.
The last deadline is set by the US Department of Education (USDE), the agency responsible for the FAFSA: June 30. The disappearance of the FAFSA form from its official site is a sign that you have missed the deadline.
Technically, you can go through an entire year of college before filling out the FAFSA.
But given that financial aid is finite and some of its forms are doled out on a first-come, first-served basis, just like what was mentioned earlier, waiting for a long time before you file the FAFSA form is a terrible idea.
Help From Parents
According to a recent report by the Education Data Initiative, around 83% of undergraduate students seek the help of their parents in paying for a portion of their higher education.
It’s not uncommon for parents from the middle-class sector of society to set aside what money that they can in order to fund the steep college costs when the time comes for their kids to step foot on higher education campuses — says the spring the article by the Wilson Quarterly, which is a Washington, DC-based magazine.
Parents who help their young ones stay in college hope that their children will repay them once they have their degrees, which allows them to make more money than those whose highest educational attainment is high school.
The majority of parents who pay for their teeners’ college rely on income and savings.
There are those, too, who take out parent loans.
So, what’s the difference between a parent loan and a student loan?
Simply put, a parent loan is a loan that the parents of a dependent undergraduate can use to help pay for college or even career school. Needless to say, the parents assume full responsibility for the debt.
Going back to the Wilson Quarterly article mentioned above, it stated, too, the fact that students who receive parental funding for their college education are more likely to graduate.
As a matter of fact, the chances of undergraduates getting their hands on a bachelor’s degree amount to 63% if their parents shell out $4,000 a year for the college education of their kids.
On the other hand, the odds of graduating drop to 56% for those who are not getting any financial assistance from their folks.
However, it’s also important to point out that, based on a report in the American Sociological Review (ASR), students who receive parental funding tend to have lower college GPAs.
Most financial experts urge parents to start saving for college as soon as their little ones, whom they would like to become holders of a bachelor’s degree someday, are born into this world.
However, the fact is that there’s no such thing as saving too early for higher education.
As of this writing, the total number of 529 plan accounts in the US amount to 15.81 million, all of which have a combined total amount of $457.7 billion.
On average, American parents have saved $28,953 in their respective 529 plan accounts. Unfortunately, though, up to 54% of parents in the country do not know what a 529 plan is.
Also sometimes referred to as the qualified tuition program (QTO), the 529 plan got its name from section 529 of the IRS tax code. Basically, it’s a state-sponsored investment plan that can be used to pay for qualified education costs.
The account owner of the 529 plan is the one who possesses full control over it.
Just about anyone who wants to gear up for a child’s education, including K-12, college and even an apprenticeship program, can open a 529 plan account.
It can be a parent, grandparent, relative or friend. In any case, it’s the 529 plan account owner who can make important decisions, including changing the beneficiary.
Besides the 529 plan, many undergraduate students are able to afford the steep cost of higher education these days, which has more than doubled in the 21st century, with the help of their very own savings.
According to an Inside Higher Ed article, around 45% of those who attend 4-year institutions do.
Education Tax Credits
Did you know that every year, there’s a tax credit that parents can claim simply for sending their child to college as well as college students themselves?
It’s what’s referred to as an education tax credit, which helps with the cost of undergraduate education by lowering the amount of tax one owes on his or her tax return.
There are actually a couple of education tax credits available:
American opportunity tax credit (AOTC)
Simply put, the AOTC is a credit for qualified college expenses paid for by an eligible student for the first 4 years of higher education.
Every eligible student can get a maximum annual credit of $2,500. And just in case the credit brings the amount of tax owed to zero, one can refund 40% of any remaining amount of the credit — up to $1,000.
As expected, there are eligibility requirements. You can be eligible for the AOTC if you are:
- Pursuing an undergraduate degree or any other recognized educational credential
- Enrolled in college at least half-time for at least 1 academic period
- Not yet finished with the first 4 years of higher education at the beginning of the tax year
- Yet to claim the AOTC or the former Hope credit for more than 4 tax years
- Not convicted of a drug felony at the end of the tax year
Lifetime learning credit (LLC)
The LLC is for any qualified tuition and related expenses paid for by eligible students who are enrolled in an eligible academic institution.
Besides undergraduate degree programs, it can also help pay for graduate and professional ones. The LLC is worth up to $2,000 per tax return, and it can be claimed for an unlimited number of years.
You are eligible for the LLC if you or a dependent pay for:
- Qualified education expenses for higher education
- Education expenses for an eligible student enrolled at an eligible college
Working Part Time and Full Time
Many undergraduate students are enrolled in college and at the same time employed. Needless to say, they use the money they make having either a full-time or part-time job to pay for higher education and associated expenses.
According to the National Center for Education Statistics (NCES), up to 40% of full-time undergraduate students were working in 2020.
In the same year, on the other hand, around 74% of part-time undergraduate students were employed. The numbers were lower in 2015 — 43% and 78%, respectively.
Based on the said figures, it’s safe to presume that many cannot afford college costs these days.
Data provided by the NCES added that, in 2020, 15% of full-time undergraduates worked 20 to 34 hours per week.
About 10%, meanwhile, worked 35 hours or more per week. Among part-time undergraduates, in the same year, around 34% worked 20 to 34 hours per week, while 40% worked 35 hours or more per week.
Other than helping to pay for higher education, there are a few more perks that come with having a job while enrolled in college. Some of them include the following:
- Understanding the value of money
- Grasping the importance of time management
- Obtaining professional experience
- Building a network
- Graduating with less educational debt
Unfortunately, being employed while working on an undergraduate degree comes with some cons, too.
Getting low or failing grades is a possibility, especially if the student fails to budget his or her time and give enough attention to college. Having a job may also keep the undergraduate from having a social life and partaking in extracurricular activities. This can easily lead to stress and burnout, which can negatively affect one’s academic performance.
Employee Tuition Reimbursement
Speaking of working, there’s a way for a portion or the entirety of your college expenses to be taken care of by your employer. And it’s by means of the so-called employee tuition reimbursement.
Also referred to as tuition assistance, it’s a form of employee benefit.
It’s important to note that not all companies offer employee tuition reimbursement. Those who do, meanwhile, have their own set of rules about the matter.
Some of them will cover the costs only if you attend certain colleges or universities, while others will only compensate you if you enroll in specified courses, usually related to your job.
Just like what the name suggests, you will pay for your tuition and fees upfront. Once the semester is over, in most instances, you will have to show your employer the receipt for full or partial reimbursement.
The following large companies are known to have the best tuition assistance program:
- Bank of America
- Best Buy
- Capital One
- Home Depot
- JM Smucker Company
- Procter & Gamble
- Wells Fargo
Transferring From Community Colleges
The average tuition at a community college in the US is $3,400 per year — that’s just 12.59% of the national average out-of-state annual tuition cost at public 4-year schools ($27,023) and 10.36% of the national average annual tuition cost at private 4-year institutions ($32,825).
Needless to say, it’s so much cheaper to go to a community college.
It’s by taking as many general education courses at a community college as possible and then taking credits earned to a 4-year school, either a public or private non-profit or for-profit one, that some undergraduate students in the country are able to afford steep higher education costs.
Generally, as many as 60 community college credits can be transferred.
Doing the math, that’s worth 2 years of college as a bachelor’s degree typically consists of 120 credits. With only 2 more years of college remaining, one can save anywhere from $54,046 to $65,650 worth of tuition.
In order to enjoy a trouble-free transfer between 2 institutions, check for any transfer agreement.
Also sometimes referred to as an articulation agreement, it’s a contract between 2 institutions of higher education that makes it possible for credits earned at a school to be transferred or accepted at another, which can then be applied toward a bachelor’s degree.
A transfer agreement, in most instances, occurs between 2 institutions in the same state or region. Also, it’s not unlikely for such kind of an agreement to narrow the range of course options.
The following UC campuses, for instance, guarantee admission of California community college graduates:
- UC Davis
- UC Irvine
- UC Merced
- UC Riverside
- UC Santa Barbara
- UC Santa Cruz
The average cost of tuition for an online degree at a public 4-year institution is $321 per credit hour.
On the other hand, based on the same source, the average cost of per-credit-hour tuition for the same degree from the same public 4-year institution but the in-person kind is $491.
Easily, an online learner can save up to $170 per credit hour.
The average cost of tuition for an online degree at a private 4-year institution, meanwhile, is $505 per credit hour.
The average cost of per-credit-hour tuition for the same degree from the same private 4-year institution but in-person? $2,163, which is 76.65% more expensive!
Based on the latest figures provided by the NCES, up to 44% of all undergraduate students in the US are working on their degrees exclusively online. On the other hand, around 75% of them are enrolled in at least one online course.
So, in other words, attending college online fully or partially is commonplace these days.
Refrain from assuming that an online degree won’t open as many doors for you as a traditional degree.
Especially if it’s from an institution of higher education that offers the same program on campus, it’s equivalent to its traditional counterpart. That’s because the very same curriculum is used for both.
But before you enroll online, check that the college is accredited by an agency recognized by the USDE and the Council of Higher Education Accreditation (CHEA).
Otherwise, it’s probably a diploma mill that confers worthless degrees.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily represent those of the College Reality Check.