Paying for College
College financing experts Martha Savery and Meredith Clement answer frequently asked questions about paying for college, with topics including making a plan to pay for college, evaluating the cost of each college, utilizing helpful tools, keeping track of deadlines, completing financial aid applications, and using a payment plan. They also discuss how to be a wise borrower when it comes to student loans, including researching all options and only borrowing the amount that is needed. If you enjoy the MEFA Podcast, please leave us a review.
Narrator: Welcome to the Massachusetts Educational Financing Authority MEFA podcast. In this episode, MEFA’s college planning experts answer frequently asked questions about paying the college bill. Today's featured experts are Martha Savery and Meredith Barnhart. Martha joined MEFA in 2006, after 10 years experience at Nellie Mae and Sallie Mae.
Prior to that, she directed admissions and financial aid offices at the MGH Institute of Health Professions, Harvard Graduate School of Education, and Fitchburg State University. She's been a member of both the executive council and the early awareness committee of mass mascot. Meredith joined MEFA in 2012. She directs a comprehensive curriculum of education and guidance on the college enrollment and financing process to families and counselors at high schools across the state.
She also helps lead FAFSA Day Massachusetts, and as a member of MASFA, just the facts, faculty. Her experience before MEFA includes 10 years in undergraduate financial aid at Boston University. Martha, Meredith, thank you for joining us. Now let's get started. The key to paying for colleges, having a plan, Martha, what are the first steps that families should take and putting that plan together?
Martha Savery: You know, I find so many parents, like you are so concerned about getting their child into college. That a lot of times they don't really stop to think about, okay, how am I going to pay for that? Now in my dream world, it would be that they had already been saving for their child. And they started that when their child was a baby.
But the reality is, is that when I see families in senior year in the springtime, I can't tell you how many families have said to me. I wish I had known. I wish I had thought about this. I wish I had planned for this. And so it's great that you're thinking about how am I going to pay for this now? And what you want to do is you want to make sure that you take advantage of all of the resources that are out there for you.
And MEFA Has so many, I mean, that's where we spend the bulk of our time is working with families on the paying for college piece, because it doesn't really matter if your child gets into college and you can't afford it. And you haven't really made the plan to pay. Then the news that you're going to have to share with that child of, we can't send you to that college is going to be devastating.
So the first thing I like to say to families like yours is make sure that you sit down together as a family and talk about what is affordable. What does affordability mean? And I refer to them as kitchen table conversations and they really should be. And I did it with my own children. It wasn't in the kitchen, it was around the coffee table in the living room, but we got to the same point, which is, this is what's affordable for us as a family.
This is what we're willing to pay as your mom and dad. And we really suggest that you think about how you're going to pay or how are you going to contribute? And what's going to be your responsibility as the student. So I think it's important that families have that conversation and be realistic about it going into the whole process.
Narrator: Martha, once families have figured out what's affordable. How should they go about figuring out the costs of different colleges and universities?
Martha Savery: One of the things that I hear a lot of parents ask me is, well, why should I even apply to that college? Because we couldn't afford to send my child there anyway.
And the one thing I say to them always is don't ever take a college off the list because you think the cost is too high, because what you're looking at is really the sticker price for that particular college or university, not the net price. So when a family goes through the process of applying for financial aid and being considered, and perhaps getting a financial aid award from a particular college or university, they may find that that college that they thought initially was out of their reach financially is okay.
They can afford that. So, but if you don't give yourself the opportunity to even apply, then you've done yourself a disservice. I think, so I think the first thing is don't ever take a college off the list. Net price for colleges or universities is kind of a new buzz word that's been out in the media a lot.
And I know a lot of families ask me, what does that really mean? So net price means simply taking the published cost of a college or university, which always is their tuition and their fees, their room and board charges, miscellaneous charges, travel expenses, kind of the all-in cost that a college publishes or subtracting from that whatever financial aid or merit based financial aid awards the student may have received.
And what remains from that is the net price that the family would be responsible for covering. The second thing is to always make sure you have an affordable option on the list. And that affordable option, it could be a public college or university, or it could be as simple as making sure that you're applying to a college where your child has a really strong academic profile for that particular college or university.
And that college or university may be willing to give a great award to that student because they want those strong academic leaders on their campus.
Narrator: Meredith, are there any tools out there to help families figure out the true cost of college?
Meredith Clement: College has what we call a cost of attendance. And that includes the cost that you've heard of that are on the college bill, the tuition, the fees, the room and the meal plan.
But every college also has additional costs. Personal expenses, books, travel to get to the school. And then once the student is on campus and all of these costs together make up the cost of attendance for one year at a college or university. One tool that we recommend to families are the net price calculators.
And they're found on every college and university website in the country, families can access these calculators. They're asked a few different questions about their finances and their household. And then at the end, the calculator provides the families an estimate of what that family. Could potentially receive in financial aid at that particular college or university.
This is a great tool as it gives families an estimate of what they might have to pay every year that the student attends that school. It's really never too early to start using a net price calculator. We have seniors in high school who used them, but we also have families who have students and children in elementary school who are using net price calculators.
It's a great tool as it just gives an estimate to families of what they may have to pay. If we have families with a high school freshmen or sophomore, that's the first tool that we recommend as it gives families a starting point to be thinking about college costs. The result from the net price calculator isn't a guarantee, but it's a great estimate that allows families to have an idea of what they'll have to save and then pay at every school.
Narrator: So once families have a good understanding of the true cost of each of the colleges and universities that they plan on applying to, what's the next step?
Meredith Clement: Every college and university is going to have a financial aid deadline.
And this is different than the admissions deadline. Deadlines are extremely important because of a student misses a financial aid deadline. It means that the student could potentially lose out on a significant amount of financial aid. So we tell families once they start the college admissions process to make a list of all the colleges and universities and their financial aid deadlines. We tell families to make sure they're aware of the different financial aid applications that are due and to know exactly when they need to turn that in. There isn't actually one place where families can look at the deadline for every college and university.
We tell families to visit the financial aid webpage of every college and university, and that webpage will list the deadline and the application requirements. So families really do have to do their homework and seek out every website of every college and university to which the student is applying.
Narrator: Actually filling out and sending in the financial aid form seems like a complicated process. What can you tell families who are worried about getting through this step?
Meredith Clement: One of the things that families are always worried about in the financial aid process is how complicated it is. They are worried about completing the forms.
They're overwhelmed. They seem very difficult. And we assure families that though there are a lot of numbers involved and sometimes a lot of questions that they will get through the process. We talk to families all the time, giving them great resources and information to get them through those financial aid applications.
When families need to start on those financial aid applications, it's really a good idea for them to gather their tax returns for the most recent calendar year. And we'll be referred to throughout those financial aid applications. So families should really gather the most recent tax return that they've completed as well as all their asset statements, bank statements, investment stocks, any documents that show the worth of their assets.
If there are any other financial documents that the family has, those should be gathered as well. The financial aid applications really refer to all of the family's finances as well as their household. So any documents that support the numbers that they're putting on those financial aid applications should be used.
So even though families are worried, of course they should fill out those financial aid applications and we encourage them to get started and then call us with any questions.
Narrator: It’s good to know MEFA as college planning experts are available to help. At the end of this episode, we'll give you MEFA’s contact information.
Let's jump ahead. Acceptance letters and financial aid packages have arrived. A school has been chosen and now the bill Meredith, talk us through the bill.
Meredith Clement: Making a plan to pay the college bill is extremely important. We encourage families to look to their savings, their present income, what they're taking in on a monthly basis, and then to explore loan options and use all of those resources to make a plan so that they're ready to pay that bill when it comes.
Families will receive the bill in the summer. And there will be a due date associated with that bill. Many colleges and universities require the bill to be paid sometime in early August. Families usually receive the bill sometime in late June or early July. So families are given about a month once they received that actual bill to make a plan of how they'll pay it.
Once families have received their bill and they understand exactly what they owe, we talk to families about using the resources that they have and then exploring different loan options. Once families have determined how much they can use their savings and how much they can allocate from their monthly salary, we talk to families about electing a loan and both parents and students can explore loan options.
Families will often ask us what actually is on the college bill. Families will receive that bill for the first time, sometime in the summer. And on that bill will be the tuition, the fees, the room, if the student is living on campus and the meal plan, if the student is taking part in a meal plan. Also on that college bill will be all of the financial aid that the student has received.
So if the student has been given grants and scholarships, or any type of loan that will also be listed on the college bill. The financial aid will be subtracted from all of the charges that the student has received and the resulting difference is what the family needs to pay.
Narrator: Martha, what advice would you give to families who are considering their loan options?
Martha Savery: I think the most important thing is when anyone is considering borrowing, they should make sure that they're going to be a wise borrower. They should know before they sign that loan promissory note, what their interest rate is. You know, the way that we show that information at MEFA is right up front.
It's transparent. Anyone can access that information and it's there for everybody to see, but there are other providers where you have to kind of work kind of hard to find that. So they should know what their rate is. They should know whether it's a fixed or variable rate. They should understand how long the repayment period is.
Is it 10 years? Is it 15 years? You know, do they need to begin the repayment of that loan immediately? Who else is on the loan note? Is it just the parent, is it the parent and the student together, is it the student alone with the parent as a co-borrower? So what we will often say to families is we know after having done this for 30 years, that families will pay for college, really in a combination using a combination of past income for savings, present income through maybe using a tuition payment plan and future income by borrowing.
Narrator: Meredith, Martha mentioned payment plans. How do families determine the amount to allocate toward a payment plan?
Meredith Clement: When we talked to families about payment plans, we talked to them and encourage them to allocate as much as they can into the payment plan out of their monthly budget.
So we encourage families to look at their entire budget of all their household expenses, figure out how much they can allocate for college costs, and then to put that amount into the payment plan and the amount they put into the payment plan will go to pay the college bill directly. There's usually a small fee that families have to pay when they set up the plan.
But beyond that, there's no additional fees or costs. So it's a great way to help pay the college bill.
Narrator: Got it. So what final tips do you have for families who are choosing a mutual loan or any loan for that matter?
Meredith Clement: When families are trying to figure out a loan, we tell them to really do their research.
There are a lot of organizations and banks and lenders out there that do offer loans to families to help pay the college bill. So we tell families to look around, to talk to their bank, their own credit union, even their own employer and explore all the possibilities. Then once families have determined a loan, we tell them to make sure that they take really only what they need in a loan.
We never want families to borrow more than they need, because we do remind them that they will have to pay back that loan in full after graduation. When families are exploring different loan options, we tell them to take into consideration a few different things. And the first is the interest rate. The interest rate on the loan can be fixed or variable.
And with a fixed interest rate, the monthly payment won't change. Families will repay the same amount every month for the life of the loan. With a variable interest rate, the monthly repayment amount could change. So we want families to be aware of that. Families should also be aware of the actual interest rate on the loan.
There can be a wide range of interest rates depending on the type of loan that the family select. So we really want them to pay attention to that number. And then we also want families to know about who the primary borrower is on the loan. The student could be the primary borrower. The parent could be the primary borrower or the student, and the parent could share that responsibility.
And then finally parents should know how long they have to repay that loan. They may have 10 years, 15 years, 20 years. So it's important for them to plan how long they'll have in order to pay that loan back.
Narrator: And that concludes this MEFA podcast episode. We thank today's experts, Martha Savery and Meredith Barnhart.
To get more information on how to plan, save, and pay for college. Visit mefa.org, email firstname.lastname@example.org, or call a MEFA expert directly between 9:00 AM and 5:00 PM Eastern standard time. The experts are here to answer your questions one-on-one, invite you to upcoming events or seminars, or steer you to an online webinar, packed with the information.