How to Pay for College
4/10/2007 - By Kim Clark, US News & World Report

During the first 18 years, parents try to shield their kids from many of the ugly realities of life and encourage them to dream big dreams. But the mail carrier brings all that to a shuddering halt for many families this month. It's not just the slim college rejection letters. Increasingly, those fat acceptance packages also contain heartbreak, because they offer such low financial aid awards that students simply can't afford to attend the schools of their dreams.

The average financial aid award accompanying this month's admission letters leaves a record dollar gap between the total cost of attendance and families' savings. To make matters worse, the interest rates on educational loans will soon jump by at least 1.5 percentage points. Yet growing competition in a global economy is making a college degree an increasingly necessary ticket to the middle class.

That necessity is forcing just about everybody to become more inventive. Parents and students, for example, are pushing colleges harder to award more financial aid. They are scouring charities and alternative lenders for cheaper loans. And students are working longer and smarter at part-time jobs.

Typical is University of Delaware senior Allyson Goldscher, who covers her living expenses by working part time as a case manager for troubled kids, a job she expects will help in her quest to become an attorney specializing in family law. She has cobbled together tuition by writing essays to win thousands of dollars of private scholarships and $15,000 in interest-free education loans. She has also negotiated a bigger award from her school's financial aid office. "There's money out there," she says. "I just have to fight for it."

Freebies. The good news is that there is a little more money out there to fight for. Harvard, Stanford, the University of Pennsylvania, and other elite schools
recently announced plans to offer free tuition to low- and middle-income families. Some economically troubled communities, such as Kalamazoo, Mich., have unveiled free-tuition scholarships for local kids. Earlier this year, Congress created new scholarships for low-income math and science students this fall. But those expansions in aid are dwarfed by tuition price hikes and the booming demand of one of the biggest high school graduating classes in history. Early indications are that sticker prices will jump at least 5 per-cent again next year, more than 1 point faster than inflation.

A typical entering freshman at an in-state public university this fall should budget at least $90,000 for all the costs of getting a degree. (That assumes five years of
study, since fewer than a third of all public-college students finish in four years.) Only half of public-college students get any grants or scholarships to defray that
cost, and those average just $4,000 a year or so.

The 26 percent of students who plan to attend private colleges will face a total sticker price averaging $140,000 before they toss their mortarboards in the air.
(That's for four years of study, since about half of private-college students finish on time.) Nonprofit private schools are much more generous with aid, giving about three fourths of their students scholarships, typically ranging from $7,000 to $9,000. But the average family of a private-college student will probably still have to come up with $23,000 next year, the College Board estimates.

True, that's expensive. But, says Harvard economist Susan Dynarski, it will most likely be more expensive not to go to college. College grads earn about $1 million more, on average, over their lifetimes than those who have never gone to college. Their jobs typically offer better perks, fewer layoffs, and even more fun, says Dynarski. "It's an investment," she explains. "People who go to college have better lives."