Alternative Options for Financing College
The current student loan debt is at $1.4 trillion, according to The Student Loan Report.
Ohio’s 2016 college graduates have an average student debt of $30,351 and 64 percent of graduates have debt from, The Institute for College Access & Success, calculations from four-year public and private non-profit intuitions.
Ohio’s average in-state four-year public tuition from the 2017-2018 school year is $10,505 according to the College Board. CollegeCalc reports Ohio as the 20th most expensive and 33rd most affordable state to attend college with tuition only $1,218 higher than the U.S. average.
“The message that we try to show is that it is going to be to your benefit in the long run to get a degree whether that’s an associate’s degree or a certificate or a bachelor’s degree, ” said Jeff Robinson, the director of communications at the Ohio Department of Higher Education, ODHE.
The ODHE has encouraged Ohio’s universities to adopt policies that keep tuition low. Two such policies are tuition freezes and tuition guarantees. Tuition freezes prevent an institution from raising tuition until the terms of the freeze allow an increases. While tuition guarantees, guarantees the cost of tuition will be the same from a student’s first semester to their last semester at that institution.
“I think you’ll find that a lot of the states, probably all of our states, are concerned with the topic of student loans and student debt. And you’re seeing a lot of that now and how it affects when students can buy a house and the things they are doing with their lives after they’re done with school,” said Robinson. “So I think there’s concern universally about that, and so what we’re doing is finding how we can keep students from having that debt in the first place.”
College Credit Plus, another ODHE program, allows high school student to earn college credit while still in high school. These students get to attend either public universities or community colleges for free. Private schools are also an option, but may come with fees.
According to Ohio’s Attainment Goal 2025, the ODHE wants to have 65 percent of Ohioans between 25 and 64 years old to have a degree or other form of postsecondary education by 2025. This goal is focused around ensuring Ohio has the skilled and educated employees it needs to compete in the future economy.
College can be financed through saving plans, student loans, scholarships and grants, each coming with different application processes, benefits and restrictions. Loans, scholarships and grants are all applied for, while college savings plans are opened by parents allowing them to set money aside to pay for their child’s future.
Financial Aid: Broken Down
College Savings Plans: allow money to be set aside to help offset future costs of higher education. Vanguard a leader in the investment industry lists 529 plans, Uniform Gifts to Minors Act of Uniform Transfers to Minors Act UGMA/UTMA accounts, General Investment accounts, Education Savings account, and Roth IRA as common savings plans.
Student Loans: money borrowed from financial intuitions with plans of paying back the amount borrowed plus interest.
- Stafford loans: have lower interest rates, and can have the government pay the interest while a student is in school. Repayment begins six month after graduation.
- Federal Plus Loans: let parents with decent credit histories to borrow money for their child’s education expenses. Repayment begins 90 days after the school receives the full price of the loan.
- Private-education loans: are loans offered through private financial institutions such as banks. The repayment terms, amount browed and interest rates are determined by the lender.
Grants: need-based financial aid that is given to students fitting specified qualifications. Grants can be given by federal or state governments, higher education intuitions, in addition to private and nonprofit organizations.
Scholarships: financial aid typically given to students based on skills, talents, or abilities, but can also be given for other reasons. Scholarships can be given by businesses, religious groups, higher education intuitions, alumni groups, or community organizations.
Most states have 529 plans, which were set up through the Internal Revenue Code 529. These plans are designed for higher education saving.They can be used at any intuition that accepts federal funding and across state borders. 529 plans grow tax-free and are often tax deductible, but if not used for higher education the withdrawals could be taxed and have a penalty fee.
Ohio Tuition Trust Authority manages CollegeAdvantage Ohio’s 529 plan. Tim Gorrell, the executive director of Ohio Tuition Trust Authority, said Ohio was one of the leaders in college saving plans, saying Ohio started working on a plan before the 1996 introduction of Internal Revenue Code 529.
“I think Ohio values whatever comes after high school, and there should be a mechanism to help people offset those costs. I mean there are other programs that you see in the news, the governor’s office, the legislature, higher education, and even colleges and universities look for ways to hold the cost for education. But the fact of the matter is there is cost associated to it,” said Gorrell. “So why not give people a mechanism to save and invest in one of those savings and investments can grow and help offset if not cover all those costs for higher education.”
Joel Wymer, a financial advisor and owner of Tax and Financial Strategies, recommends researching colleges, degrees and saving plans to help decrease the cost of college.
He suggests freshman, sophomore and juniors in high school start researching colleges and programs. This way students have a plan, preventing them from extending their time in college and increasing the cost by avoiding major and school transfers. Then, come their senior year of high school, students can wait for financial aid offers and acceptance letters.
Both Wymer and Gorrell recommend parents start saving for college once their child is born, but they also acknowledge any amount of money saved before hand will be beneficial to the child’s future.
The type of institution a student attends is one of the biggest factors in determining how much that student’s education will cost. There are public schools, private for profit, private nonprofit and community colleges.
Public schools receive funding from the government and state, helping the intuitions to have lower tuition costs. While private schools are more expensive because private schools receive funding from private financing sources and tuition.
The biggest difference between private nonprofit and for profit schools is private for profit schools expect to make a profit from providing students an education. Then community colleges are commuter-focused schools that offer two-year degrees.
The FAFSA, free application for federal student aid, determines the financial aid students are eligible for, and is filled out every year a student attends college. The office of Federal Student Aid manages the FAFSA.
“Being totally accurate on the FAFSA is a huge thing. We see a lot of mistakes on FAFSA forms and unfortunately some of them you can fix, and some of them you can’t,” said Wymer. “We like to actually help the families do the FAFSA form that way we know they’re not making mistakes on it. Because a mistake could cost you financial aid.”
For additional information the ODHE offers a number of resources on its website, Ohio Tuition Trust Authority offers a college saving planner, and all of Ohio higher education institutions offer information on tuition, fees and financial aid.