Category Archives: Student Loans

Budgeting for Books and Supplies

When comparing the two schools my son is considering, we noticed an interesting data point: one school estimated books and supplies to cost $800 annually; the other $1,146. One of the schools my daughter applied to estimates $1,800. While I can certainly understand that different meal plans or living options might be more or less expensive at different schools, it’s hard to understand why books would cost 50% or 100% more from school to school.

We’re trying to make apples-to-apples cost comparisons, but we’re getting grapefruit and bananas from the schools. Why would they have such different prices? First of all, according to several unnamed sources, these are not numbers that are calculated in any detail. (One former public university administrator said, “We make that up.”) But a big factor is financial aid: students generally can only borrow up to the total cost of attendance, and that includes the school’s estimate of the cost of books and supplies. If school A budgets $346 more annually for books than school B, students at school A can borrow an extra $346, all else being equal.

So how much should you budget for books and supplies? According to the College Board’s Trends in College Pricing, the average undergraduate budget for books and supplies for the current school year is $1,240. But the National Postsecondary Student Aid Study said that students spent $900 on average on course materials and supplies, and the National Association of College Stores said that students spent $484 on course materials, with another $612 being spent on technology and supplies, and that this total has been on a consistent downward trajectory over the past 10 years. That’s a pretty big range, and one thing to note is “supplies” often includes a computer which would definitely tip the scale. But it probably isn’t something you’d buy every year.

One can generally assume that books would cost roughly the same amount for the same major, regardless of schools, which is how you should compare them. Why might there be variances in book costs between schools? Much can depend on the professors. An acquaintance who is a professor at one of our local colleges mentioned she stopped using a textbook because its price went up to $150 and she didn’t think students should have to spend that much. She also mentioned that she, like many other professors, is increasingly using free online resources. At the same time, one of her kids who’s currently in college was assigned an accounting textbook that cost $600. Another factor that can drive costs up: students attending smaller schools in remote locations might have less used books available locally. Then again, there are numerous online options.

If you’re concerned about this cost, reach out to schools directly to find out. Often online syllabi or course catalogs include the books assigned for the class so you can calculate what your specific classes are likely to cost. You can also reach out directly to the academic department to ask, or ask a current student when you visit the campus. And then you’ll want to research how best to get the books you need: buy vs rent, new vs used, campus bookstore vs online, …

To Borrow or Not to Borrow

Planning for college cash flow can be tricky. It’s not just that the average public university costs over $25,000 per year whereas the average family has saved just over $18,000 total. There’s also the combination of tax credits and their attendant rules, a confusing menu of borrowing options, and misunderstandings about how aid formulas treat savings. Add multiple children with overlapping college years and it’s no wonder many parents throw up their hands in despair. One common theme I hear from parents is a version of, “We’ll just spend our savings until it’s gone and then borrow what we need.” This may or may not be the right answer. Continue reading To Borrow or Not to Borrow

Student Loans and Mortgages

There’s been a great deal of press in recent years about the impact student loans have on the larger economy, especially home purchasing. A Federal Reserve Bank of New York report showed a decline of 8 percentage points in home ownership among 28-to-30-year-olds from 2007 to 2015, and estimated that about 1/3 of that can be attributed to student loan debt. Because that’s all a little abstract, and because decisions families make now about college and student loans have the potential to cast a long shadow on the student’s life, I asked mortgage broker Tim McBratney of Pacific Residential Mortgage to explain how student loans affect the mortgage qualification process. He notes that the process has gotten more difficult with respect to student loan debt. Continue reading Student Loans and Mortgages

Where do Massive Student Loan Balances Come From?

Education is a good investment, and assuming some debt to earn a bachelor’s or advanced degree tends to pay off for most. For example, a student who took out the maximum direct student loan each year for four years would pay a little over $300 per month for 10 years to fully repay their loans. The average salary for a recent college graduate is over $51,000, and the Bureau of Labor Statistics shows median weekly earnings for bachelor’s degree holders being $461 higher than the median for those with Continue reading Where do Massive Student Loan Balances Come From?

College Prep by Grade

I gave a financial aid talk to college and career center volunteers at our high school recently. One question stood out: “This is a lot of information to absorb at once. Can you break it down into some specific suggestions by grade?” Two ideas are important here: College planning is a process that should start well before senior year, and there are things that can be done at any point to make things go more smoothly when the time comes to start applying. So here goes. Continue reading College Prep by Grade

Estimating Post-Graduation Loan Burden

For many teenagers, it’s difficult to understand the true burden of student loans. For someone whose primary source of income has been mowing lawns, the average college graduate starting salary of over $51,000 often seems a little bit like winning the lottery. Unfortunately, it also leaves many feeling like student debt will be no problem. Variations on the theme of, if I’m making $50,000 a year, it won’t take any time to pay off $50,000 in student loans, abound. However, the facts are somewhat different: all-in, Continue reading Estimating Post-Graduation Loan Burden

Why File the FAFSA?

Every year, a large percentage of the eligible population fails to file a FAFSA: the Department of Education estimates 40% of high school seniors do not file it and 25% of college students do not renew their FAFSA. And yet, there are plenty of compelling reasons to do so. The obvious one is access to financial aid. Here are some other reasons: Continue reading Why File the FAFSA?

FAFSA for Divorced Parents

This is a big topic so for today I’m going to focus on general rules. Keep in mind the FAFSA rules are different from the CSS Profile rules; below is FAFSA only.

The custodial parent for the FAFSA can be different than the custodial parent in the divorce decree and/or different from who claims the student as a dependent on their tax return. The FAFSA defines the custodial parent as “The parent that you lived with most Continue reading FAFSA for Divorced Parents