Financing College Costs in 2012: Smart Tips

Most likely, your 529 plan and equity in your home are still down, but tuition keeps rising. Still, there's money out there for students who need help with college financing. Here are 12 tips to help you attend school for less in 2012.

Go to college despite the job market

The year 2011 provided several arguments to skip college -- high unemployment rates, tuition hikes and a harsh job market for grads. Go anyway.

"The jobs that are growing, the industries that are growing and the markets that are going to be available to students are those that require higher education," says Brittania Morey, spokeswoman for the Iowa College Access Network. "Students who are choosing to go to college are preparing themselves for the work world of tomorrow."

According to a 2010 report by Georgetown University, 63% of jobs offered by 2018 will require postsecondary education. Morey says students can cut college costs by searching for scholarships early and investigating awards in their community.

Don't eliminate yourself

The biggest mistake students make is believing they're not eligible for college aid. A 2009 study by showed that 2.3 million students who would have been eligible for the federal Pell Grant missed free college cash because they didn't apply.

While students attending pricey institutions frequently apply for aid, the likelihood is lower at cheaper schools and community colleges, says Diana Fuentes-Michel, executive director of the California Student Aid Commission.

"That's where folks tend to believe that they wouldn't qualify for financial aid because of the low cost," she says.

The U.S. Department of Education reports that all students, regardless of income or financial assets, are eligible for up to $27,000 in federal Stafford Loans over four years.

File for FAFSA fast

The Free Application for Federal Student Aid, or FAFSA, qualifies students for federal grants, loans and work-study jobs as well as some private and state-sponsored awards. Filing it as close to Jan. 1 as possible maximizes your college aid eligibility, says Lynda Forster, CEO of the financial aid consulting group Collegiate Capital Corp. in Mineola, N.Y.

"Most (families) think that financial aid forms must be completed after the tax returns are done, and that is not accurate," she says. "You cannot wait until April. All of the money is already awarded."

Since federal grants are distributed on a first-come, first-served basis, Forster recommends that families file the form using estimates of their income and assets. If they need to change something, families can file corrections at

Choose your major carefully

From private loan-forgiveness programs to state and federal grants, there's money available to students majoring in high-demand fields. While the federal government offers up to $4,000 per year to future educators through the Teacher Education Assistance for College and Higher Education, or TEACH, Grant Program, individual states offer similar college financing initiatives for up-and-coming teachers, nurses, fire and emergency medical technicians, public defenders, child care employees, health care workers and those pursuing jobs in other fields.

Students who know their major can check with their school's financial aid office to see if there are awards available in their fields. Professional organizations and nonprofits, such as the National Restaurant Association and the National Environmental Health Association, also offer awards to students in specific fields of study.

Find a 'safety' school

Guidance counselors recommend that students apply to an academically safe school. Martha Savery, director of community outreach for the Massachusetts Educational Financing Authority, recommends that students apply to a financially safe school, too.

"We always tell families (not to) self-select based on the cost that you see in the admissions material because many colleges and universities are able to provide a substantive financial aid package," Savery says.

As of Oct. 29, all institutions that receive federal funding are required to post a net price calculator on their website that can help families estimate college costs with aid factored in, according to the National Center for Education Statistics. Students also can compare net prices of different schools by income level on the NCES website.

Meet the deadlines

With more students vying for aid, there's stiff competition for dollars. Don't eliminate yourself by missing a deadline, Savery says.

"If your child was applying for admission to XYZ university, you would not contact that admissions office and say 'You know, I'd like just three or four more days just to tweak my essay,'" she says. "(Families) need to look at the deadlines from a financial aid perspective in exactly the same way."

Ask the boss

A 2010 study by Business and Legal Resources, a compliance consulting firm in Old Saybrook, Conn., showed that nearly 85% of U.S. companies offer tuition reimbursement to employees. That's up from 52% in 2007.

There are some pretty big catches. More than 75% of employers require that course work be job-related to qualify for reimbursement. Companies also may restrict how much reimbursement employees can get, require a certain grade point average or limit reimbursement to employees at a certain job level. More than 60% of companies offering reimbursement require employees to stay with the organization after completing study.

Go federal first

Federal loans are still the cheapest student loans. Through June 30, subsidized Stafford Loans will carry a 3.4% fixed interest rate. All Stafford Loans -- subsidized, unsubsidized and grad loans included -- disbursed after June 30 have a 6.8% fixed interest rate, according to the Department of Education. Stafford Loans are capped at $27,000 over four years for dependent students, but Morey says that federal loans to parents can help.

Through the Parent PLUS Loan, families can borrow up to the cost of attendance minus financial aid the student has received, and they'll only pay 7.9% in interest -- a rate that's far below those of many private loans, according to DOE.

Cap those loans

Federal student loans also can be capped at 15% of a student's "discretionary income." That's defined as earnings above 150% of the poverty line. For 2011, discretionary income would include earnings above $16,335 for a family of one, according to the Department of Health and Human Services. Earn less than $16,335, and the federal government won't charge you anything for your student loan as long as your income stays below that threshold.

A double bonus is that students who make consecutive loan payments for 25 years will have their debt forgiven, according to the Oakland, Calif.-based Project on Student Debt. The time frame is reduced to 10 years for students who work in public-service professions such as teaching or social work after graduation.

Despite the tremendous potential savings, research shows that few students take advantage of the program. A White House fact sheet from October says that only about 1.3% of students with federal loans opt for income-based repayment.

Fight the hikes

Thanks to state budget cuts, tuition and fees at the average two- and four-year public institutions rose by about 7% this year, according to the College Board in New York. But in states such as Florida and California, prices at undergraduate state universities rose by 15% or more.

"The immediate kind of response to (tuition hikes) is to put it on a credit card or to look to their parents to try to get them to take a loan out," says Fuentes-Michel.

The problem is that parents frequently can't take on additional debt, and credit card interest rates are substantially higher than those of federal student loans. Instead of falling in the plastic trap, Fuentes-Michel recommends that students look to federal loans, private scholarships and part-time employment for college financing.

Save the right way

One of the strangest loopholes of financial aid is that how you save can impact your aid just as much as how much you save.

"Money put into a student's name is not the place where you want to park it," says Forster. "A student's assets and income (are) counted much higher than a parent's."

While assets saved in a parent's name can subtract up to 6 cents for every dollar from your federal need-based scholarships and grants package, every dollar of student assets takes away 20 cents, according to the White House's National Economic Council. Money saved in a grandparent's or relative's name won't count at all. However, 529 plans are one exception. Funds stored in a 529 plan in the student's name count as parental assets, according to, the college financing resources website.

Reconsider 529 college savings plans

Many 529 plans lost value when the market dipped in 2008, but they're coming back -- this time with more conservative investment options. In the past two years, states including Nebraska and Indiana have added financial options insured by the Federal Deposit Insurance Corp. that allow parents to access 529 tax incentives without taking any market risks.

On top of providing federal tax-free growth, certain states also provide state tax incentives and matching grants to encourage account holders to save.

Copyright 2012, Bankrate Inc.