Montgomery, AL (WSFA) - Many American families are living tighter, more frugal lives this year, thanks to hard lessons learned through the current economic crisis.
A group of those families will spread their budget even thinner next year by sending their teenagers to college.
Many students are learning a hard lesson in a class they didn't register for - finance 101. Alabama's student costs have gone up to the second highest increase to any other state in the country over the last year. This year, the Alabama Higher Education budget was sliced by 150 million dollars, forcing universities to shift the financial burden to the students.
Currently it takes about 12 thousand dollars a year to cover a student's tuition, books and board at Auburn University, and many families say, that is 12 thousand dollars they just don't have. Gordon Stone is head of the Alabama Higher Education Partnership. He tells WSFA 12 News, the department of education has been very supportive in realizing that extra assistance will be necessary.
The crisis is changing the landscape for student aid, starting with federal loans: instead of helping secure a brighter future, students could face years of debt - paying back the borrowed money. Mike Reynolds is the financial aid director at Auburn University. He says, "In the past they had provided a lot of incentives, like lower interest rates and rebates." The other problem is the number of lenders is shrinking. Reynolds says, "We had 35 last year, now due to the economic crisis, what has happened is our list now is around 12.
Reynolds says the best way for students to secure federal funding starts with a special form. The FAFSA application examines the student's financial situation, and awards money based on need. The form automatically puts the student in the running for subsidized and unsubsidized federal loans, smaller entitlements like work studies, educational opportunity grants and university issued loans, not to mention free federal money available through pell grants and smart grants.
Experts say it can also pay to declare a major early. Many universities have donor driven grants set aside for a students in a particular field of study. For those students who don't meet the requirements for a federal loan, there is another option called alternative loans. However, advisors say beware of a stringent credit check.
There is also supplemental source of federal aid called parent plus loans. On the other hand, if students apply for aid, and receive more funding than they actually need, advisors discourage them from accepting it, because it will only set them up for more debt following graduation.
The state also offers an affordable pre-paid tuition plan called "PACT,"which cuts the costs of higher education, if its purchased early. For example, if a first grader is enrolled in "PACT" this year, it will cost around 25 thousand dollars for a 4 year college plan, which is roughly what it costs to send a student to a public university for two years.