General Information Sources on How to Pay for College

Parents and students reported being initially overwhelmed by the hunt for information and money to pay for college. First-timers (e.g., parents with their first child going to college or students without parental assistance) seemed to find their own way toward the information they needed, although they were unsure whether they had done the right thing. Students and parents were inundated with descriptive information about the sources to pay for college, but they did not have a clear strategy on how to minimize the amount of borrowed money.

A freshman attending a private four-year university in the Chicago area explained that because she was first in her family to go to college, she thought strategic advice on how to prioritize different funding sources “would be helpful at the beginning of the [college funding] process.” In addition to talking with family and friends, students and parents used high school guidance counselors, the college financial aid office, college fairs, seminars hosted by lenders, financial magazines (e.g., Kiplinger’s, Money), and their accountants or financial advisors.

Many parents and students started to learn about federal student aid at least two years before entering college
(e.g., when the student was a junior in high school and starting the PSAT/SAT preparation process). Figure 1 describes the process to determine a student’s eligibility for federal financial aid. Early in the process, parents and students recalled the more general information sources. During this time period, parents and students indicated that they spent most of their time preparing for college (e.g., doing well in school, preparing for the SAT test), identifying colleges that met their academic needs, and finding out how to be admitted to the college(s) of their choice. Students and parents explained that they did not identify the loans that they would need until the student was admitted to college and they received the college’s financial aid award letter. A parent of a four-year student in Boston summed up this learning process when he said, “I looked into [how to finance college] earlier, but I wasn’t sure what I would get [until my son was admitted].” Even then, students and parents discussed how they were often in a rush right before school started to line up their financing sources.

When they received the financial aid award letter (often in the late spring of their senior year in high school), they began to figure out the amount they would be expected to pay. A sophomore at a four-year college in the Boston area summed it up when he commented that the financial aid award letter allowed him “to see how much I needed to make up in loans.” Several current and former students indicated, however, that they had borrowed too much because they did not understand the costs they would have to repay.

Not only do the financial aid award letters fail to provide students and parents with the information they seek to make informed decisions, but the terminology and format used make it difficult to understand the award provided. Several students explained how they did not understand the language used in their letter and that they called their college’s financial aid office for help. Our research found that some financial aid award letters fail to inform students and parents about items that they were most concerned about including:

  • A breakdown of the direct (e.g., tuition, room, board, and fees) and estimates
    of the indirect expenses (e.g., travel, books, etc.) of one year of college,
  • The financial aid awarded that the student does not have to repay (e.g., scholarships and grants),
  • The conditions under which scholarships and grants are renewable each year,
  • The amount of work-study and the condition under which the student has to fulfill the work-study,
  • The loans for which the student is eligible,
  • The loans for which the parent is eligible,
  • The interest rates, loan terms, monthly repayment amounts, and total repayment amounts of loans for which the student/parent is eligible,
  • The actual net amount (cost of attendance less financial aid offered) that the student and parent will have to pay to attend one year of college, and
  • Where a student and parent can seek additional information.
Students and parents explained how all of this information is critical to the college financing decision. One current student at a two-year school in the New York area captured this perspective when she suggested that, “when [the college] send[s] you an admission letter that you have gotten into college, they should send a small booklet that should be solely, like in big print, about how to finance your education.”

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