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- [ Voiceover] Why don't we go ahead and take a look at an example package, just to see how all these numbers hang together. - [Voiceover] Okay. - [Voiceover] So why don't you start me off with the estimated cost of attendance. - [Voiceover] So let's say at the first institution we're looking at, the total cost of attendance is about 25,000 dollars, so that might break out to tuition of 11,000 dollars, room and board or housing and food costs of about 10,000 dollars, an allowance for books, 2,000 dollars a year, transportation, depending on where you're coming from of about 1,000 dollars a year, and maybe some other expenses that are unique to that institution that would add up to the 25,000 dollar cost of attendance. - [Voiceover] Great, and just to be clear for the point you mentioned earlier, you may see on a financial aid letter just tuition, room, and board included. - [Voiceover] That's right. - [Voiceover] And if that's the case, you want to actually add in your own book allowance transportation allowance, other allowance, because those are actually going to be costs that you're going to incur, and so you want to factor that in. - [Voiceover] Exactly, the idea is that with the cost of attendance, you've got an understanding of the total cost of being at that institution, and your exact cost might be slightly different than someone else. - [Voiceover] Okay, so we've got our cost of attendance here of 25,000, you mentioned some different types of scholarships, why don't we put in some numbers here from school, let's say 10,000. What would be a reasonable amount from a Pell grant? Let's say if a family had an income of around 50,000 dollars, what would be a typical Pell grant they might receive? - [Voiceover] So a family of that income level, depending on what else is going on with the family, family size, how many family members in college, let's say that they would qualify for a thousand dollar Pell grant. - [Voiceover] Okay, so we have a thousand dollar Pell grant, we'll go ahead and say there's a 3,000 dollar grant from the state, that this student has obtained, and then why don't we also go ahead and also put in 1,000 dollar outside scholarship. This is a scholarship that is not coming from the school itself, it probably won't be included on the financial aid letter unless you've already told them about it, but it is something you want to include here because these are your own calculations of what your costs are going to be. And one sort of side note is you do actually want to let the school know about those outside scholarships, because it can have an impact on your financial aid. They want to understand your true cost of attendance, and if you've already gotten that scholarship, your cost of attendance is going to be a little bit lower. - [Voiceover] That's right. - [Voiceover] So we put in that thousand dollars, that gives us a total scholarship amount of, looks like 15,000. So now, remind me again, how do I get to the net cost here. - [Voiceover] So the net cost is going to be the difference between the 25,000 dollars of cost of attendance, minus the 15,000 dollars of scholarships or free money that doesn't have to be paid back, so what this institution's actually going to cost you is 10,000 dollars. - [Voiceover] Great, so 10,000 is what I'm responsible for and that's not one time, that's over a year. - [Voiceover] That's right, that's not saying that you have to come up with that cash all up front out of your pocket right away. There are options offered to help you come up with that 10,000 dollars, but that would be the annual cost to you. - [Voiceover] Okay, in this situation, what would be sort of reasonable work-study and loan amounts that a school could offer? - [Voiceover] So let's say a work study amount of 2,500 dollars, which would allow you to work less than 10 hours a week, I think, is a really reasonable expectation, and then a loan amount of another 2,500 dollars. So there's 5,000 dollars of that net cost that's taken care of between work-study and student loans. So that leaves the family, or the parents, with 5,000 dollars to cover of that total educational cost of 25,000 dollars. - [Voiceover] And is that 5,000 going to be due right away? Day one of school, they pay the 5,000? Or when do actually have to pay -- - [Voiceover] Typically, no, it's usually paid if it's a semester school, it would be half of it at the start of the year, half of it halfway through the academic year. So it depends on that school's academic calendar and their billing cycle. - [Voiceover] Great, and the last question I have for you, is 5,000 dollars for some families that may be completely doable. For others, that may be far above what they can contribute. - [Voiceover] The very first thing I would recommend to a family that's concerned about paying the expected family contribution that's showing up on their award letter, is that they talk to the financial aid office, and make sure that the financial aid office has taken everything into account that that family has, the financial situation that they're facing. But after you've had that conversation, if you're looking at a parent contribution that you're going to need some help with, then it's time to start talking about additional loans. - [Voiceover] Gotcha, and it looks like in this situation, you might be able to bump up the student's work study a little bit, or the student could take out these low interest rate loans, which might be better options than the parent taking out loans. - [Voiceover] As a first year student, actually, from the Stafford loan program, a student can borrow up to 5,500 dollars, so that typically would be the first thing we would recommend to a student who is looking for some additional help. - [Voiceover] Great. Is there anything else that I should be looking at when I'm understanding the different components of a financial aid package? - [Voiceover] Well, I think it's critical that you identify the difference between scholarships and loans, and work-study that are being offered. Unfortunately, it's not always readily apparent from the information that you're receiving from the school, so make sure you understand what's a scholarship, what's a loan that has to be repaid, and what's work-study. If you have any questions about that at all, go to the financial aid office to ask. - [Voiceover] Okay, so students really need to kind of put this sheet together for themselves, it's not necessarily going to be handed to them on a silver platter. - [Voiceover] That's right, I think that's the best thing to do to make sure you understand what's going on with your financial aid, and how much are you signing for in student loans, for example, to really understand the bottom line of what you're getting into.