Coping with College Costs

Planning for college costs? Prepare for sticker shock. But don't get scared, get motivated. Families have more tools than ever to explore their options, save with tax breaks, and borrow wisely.

Start by assuring yourself college is worth the investment. U.S. Department of Labor statistics for 2000 report median earnings for individuals with bachelor's degrees at $46,300 -- 60 percent higher than the $28,800 median for those with only a high school diploma. Over the course of a 40-year career the difference amounts to $700,000. And that's in addition to the immeasurable benefits of social development and intellectual challenge that college provides.

Director of Financial Aid Helen Nunn, right, and Associate Director of Financial Aid Carol Handlan.

Few know better the value of a small, private liberal arts college than Susquehanna graduates. Recently reclassified as a national liberal arts college by the Carnegie Foundation for the Advancement of Teaching, Susquehanna is listed as one of the best 218 institutions for undergraduate learning in the country in the 2002 U.S. News and World Report college guide issue.

Price Versus Cost
Susquehanna tuition, room and board total $28,500 for 2002-2003, a 4.5 percent increase over the previous year. Over the past five years, the increase in Susquehanna's comprehensive fees has averaged 3.8 percent annually, which is modest in relation to many other colleges and universities. College Board data for 2000-01 puts the average increase for private, four-year institutions at 5.5 percent and public colleges at 7.7 percent. While public colleges often appear to be priced less than private colleges, financial aid can make a private education more affordable. And the median federal loan debt for students who graduated from public colleges in 2000 was just $1,875 less than for students who graduated from private colleges.

For many students the actual cost of attending a private college like Susquehanna is considerably less -- often thousands of dollars less -- than the published price. Only about five percent of families of the university's 1,800 students can afford to pay the full price of tuition, room and board. About two-thirds of SU families qualify for some form of need-based aid in the form of grants, work-study, and subsidized loans. Merit-based scholarships assist many students and unsubsidized loans help families who do not qualify for need-based aid. Last year SU awarded more than $24 million in aid, including $16 million in grants and scholarships, $7.8 million in loans and $803,000 in work-study.

In 2001-02, about 300 students received institutional or named scholarships, many created by SU alumni who recall their own struggle to pay for college and want to "give back" in return for their own education. And because tuition and fees cover only about 80 percent of the costs of operating the University, all students also benefit from indirect aid, including investment income from the University's endowment of almost $90 million.

Financial Aid in Cyberspace
Navigating the financial aid waters has become easier for many families with the growth of the Internet. E-mail provides an additional way to communicate with financial aid staffs. Online applications for the two financial aid forms required by Susquehanna and many other schools - the Free Application for Federal Student Aid (FAFSA) at www.fafsa.ed.gov and the College Board Profile at http://profileonline.cbreston.org -- make it easier for families to apply - and reapply, as required each year.

Web sites help students and parents understand their options, including whether they might be eligible for need-based aid. Online calculators let families enter variables about their income and assets and see what they would be expected to pay at a given college based on a standard formula, explains Helen Nunn, who has been Susquehanna's director of financial aid since 1986. "Then they can go back in and see, for instance, what happens in two years when they have two kids in college? What if somebody goes back to work? What happens if someone gets a raise or loses a job?" (You can check one out yourself at http://www.collegeboard.com/article/0,1120,6-29-0-401,00.html.)

First-Generation Students
Information and guidance from the financial aid staff is especially important to students who are in the first generation of their families to consider college -- about 30 percent of Susquehanna students. The University partners with the Degenstein Foundation of Sunbury, Pa., to sponsor the SU4U mentoring and scholarship program targeting first-generation college students with substantial financial need from Snyder, Union and Northumberland counties. The Foundation awards approximately $12,500 each to five new students in each class up to a total of 20 students. This year, three students attended Susquehanna with scholarships from The McKelvey Foundation to assist rural high school seniors demonstrating financial aid need and entrepreneurial spirit. The awards, averaging $16,000, funded all school costs not covered by federal, state and SU scholarship dollars. A new $100,000 grant from the William Randolph Hearst Foundation will soon make two more $1,500 - $2,500 scholarships available for first-generation students.

Planning and Savings Tools
Early planning and systematic saving are important for all families anticipating college costs, stresses Nunn, because they offer the full advantage of the rising value of money invested over time. The latest savings and tax plan options can stretch education dollars for families willing to investigate the advantages, disadvantages and restrictions of each. (www.savingforcollege.com is a good place to start.)

The newest options include state-sponsored Section 529 plans that allow families to save and prepay for higher education expenses at public and private colleges and universities. Qualified withdrawals are exempt from federal taxes until 2010, and in some cases, state taxes. The plans are particularly attractive for higher-income families because they provide opportunities to invest substantial amounts and there are generally no limits on income.

Education IRAs, also known as Coverdell Education Savings Accounts (ESA), allow families with earned income of less than $190,000 married filing jointly and $95,000 for single filers to invest up to $2,000 per child, per year and accumulate earnings tax free to cover qualified educational expenses from kindergarten through graduate school.

Tax Credits and Deductions
The Hope Scholarship Credit can amount to up to $1,500 (indexed for inflation beginning this year) per student for the first two years of post-secondary education. The Lifetime Learning Credit covers 20 percent of up to $5,000 (increasing to $10,000 in 2003) for undergraduate, graduate or continuing education job-related courses. While both of these credits begin phasing out for families with adjusted gross incomes over $80,000 and single filers over $40,000, a new "above the line" deduction will allow married filers with adjusted gross incomes of up to $130,000 and single filers up to $65,000 to deduct $3,000 per year in 2002 and 2003 and $4,000 annually in 2004 and 2005.

Student Loan Options
Families who need to borrow to cover educational costs can do so through a variety of subsidized and unsubsidized loans. Competition among lenders works to borrowers' advantage, points out Associate Director of Financial Aid Carol Handlan. The new Keystone Best program in Pennsylvania will offer student loans with a zero percent upfront fee, plus a discount interest rate for unsubsidized borrowers. New loan consolidation programs - check out www.loanconsolidation.ed.gov -- also provide significant opportunities for alumni to lower interest rates on previous loans. Tax deductions are also available for loan interest under certain income levels.

An expert in the student loan field who joined Susquehanna last year, Handlan conducts exit interviews with all seniors graduating with college loans to explain their options. The average indebtedness of graduates in the class of 2002 with need-based loans only is $12,798, which would require a payment of about $170 a month for 10 years. The average total owed for all loans, including discretionary borrowing to offset the family contribution, is $18,855.

Work-Study Advantages
Another source of need-based aid comes through work-study jobs on campus. Such jobs offer students far more than the current $5.15 an hour pay rate, stress Handlan and Nunn. "Academic year part-time jobs can lead students places that they might not ever have imagined in terms of the experience that they get and the connections that they make," says Nunn. "And kids who work on campus get better grades than kids who don't. They budget their time better, and that's really what it's all about."

Free Scholarship Searches
Financial aid based on merit and not family income is a growing source of assistance at many schools. While many merit scholarships target outstanding academic performance, others reward diverse qualifications from student activities to religious affiliation. Though nearly all scholarship aid comes from the federal and state governments and colleges themselves, outside scholarships available at Susquehanna have increased from $423,000 in 94-95 to $696,000 last year. Web-based scholarship searches at sites such as fastweb.org and collegeboard.com provide a fast and free alternative to for-profit scholarship search firms. Most scholarships are based locally within the school district or home community, says Nunn. "So we always tell students to make friends with somebody in their guidance office."

Stumbling Blocks
Throughout the process, one of the biggest mistakes families make is depending on the wrong people for financial aid information and drawing bad conclusions, says Helen Nunn, who encourages students and families to use her office as a source, even if they're not interested in attending Susquehanna. You can log on to Susquehanna's Web site at www.susqu.edu/finaid to get ten tips on financial aid, plus some additional Susquehanna advice just for parents.

"We spend a lot of time with families strategizing about how they can pay their share, talking about what are the cheapest options, and how to combine those to make things work," says Nunn.

"Open lines of communication with the school. Don't be afraid to call the financial aid offices directly," agrees Robyn Schnell '77, a guidance counselor at Hamilton High School East in Trenton, N.J. "Nine times out of ten, there are happy endings."

Read how some current and recent Susquehanna students are coping with college costs and meet some alumni who are planning ahead to cover college expenses for their children.