Many high school seniors are eagerly waiting for college acceptance letters this week. While they eye the mailbox and inbox, parents are eyeing their bank accounts, anxious about how they're going to pay for college.
According to the College Board, it costs on average more than $30,000 a year to send a child to a four-year private college, and more than $12,000 a year for public college. So while their kids wait for the thick (or thin) envelopes to arrive, parents should start planning with "Good Morning America" financial contributor Mellody Hobson's tips.
Hobson said parents whose children had submitted their request for financial aid through FAFSA (Free Application For Federal Student Aid) should look for financial aid awards information with acceptance letters.
"Along with those acceptance letters, you should be receiving information about the amount of financial aid and awards your student has been granted at each school," she said. "According to the College Board, on average, full-time students receive approximately $9,000 of total aid at private four-year institutions and $3,100 at public four-year institutions."
Aid consists of three components: gifts, loans and work, better known as work-study programs.
"As you can easily guess, gift aid is the best kind because you do not have to repay it or work for it," Hobson said. "Gift aid can be a scholarship for academic or other talents, a grant, which is based on need, or a tuition waiver. With regard to loans, to obtain a subsidized federal Stafford loan, which is interest-free while you are in school, the school determines your need."
If your child didn't receive as much aid as you had hoped for, your first step should be to reach out to the financial aid office and appeal the amount of aid you were granted. It's best to try and make the appeal in person or at least over the phone -- avoid e-mail if at all possible.
Hobson explained the two approaches to take when making an appeal.
"The first is obvious: financial. In this case, be sure to be able to present supporting documentation about your family's financial situation. which would support your request for additional aid," she said. "The second approach is competitive. Other schools have offered you more generous aid packages, so you want to see if the package at your first choice school can be improved."
If the school still won't offer more aid, Hobson suggested looking into a variety of loans. Outside of need-based loans, students can apply for a private loan or an unsubsidized Stafford loan.
"Unlike a subsidized Stafford loan, you will be charged interest on an unsubsidized loan while you are still a student," Hobson said. "Parents can also take out loans, such as federal plus loans, to help cover the costs of college. With a plus loan, a parent can borrow up to the full amount of education costs minus any financial aid that was granted. The term of the loan is 10 years, and the interest rate is fixed at 8.5 percent."
Hobson strongly discouraged some forms of payment, including putting tuition and other college costs on a credit card because of the astronomical interest that can turn into a huge financial burden.