Options for Tuition Payment Plans

Pick The Right LoanThe goal of entering college is to graduate from college. Yet dropping out of college has become a reality for many Americans. The New York Times, reporting on the unfortunate phenomena of dropping out of college, notes that while more than 70 percent of Americans enroll in four-year colleges, less than 66 percent graduate. On the international scale, these statistics are even more worrisome as Hungary is the only country with a worse dropout rate than the U.S.

While there may be many different factors at play when a student drops out of college, proper financial planning can help students avoid the possibility of dropping out of college based on shortcomings in finances.

Payment Plans Can Help You Stay in School

As there are no diplomas issued for almost completing a degree, the decision to enter college should include a commitment to finish. Any debt incurred before dropping out will need to be repaid, which the student will have to begin doing without having the higher earnings that come with a degree. While it is well known that some of today’s greatest entrepreneurs, like Bill Gates and Mark Zuckerberg, dropped out of college, it is best to follow a well-established path when planning for college rather than hoping to be the exception.

One helpful rule is to create the best and most viable plan for financing college, stick to that plan, and be responsive to any wrinkles that develop. As part of sound planning for college, tuition payment plans can be utilized to ensure a student completes her degree.

Although there are various forms of assistance, there will likely still be a gap between the total amount of financial aid and the total cost of attending college per year. The Expected Family Contribution (EFC) is used to fill in this gap. It is possible for an EFC to be zero, but this will only be the case for low-income families. The term EFC does not necessarily reflect reality as many families cannot actually afford the estimated contribution amount. Further, according to a U.S. News article covering this topic, many families do not know their EFC until after their child has already applied to college and may experience a shock when they see an unexpectedly high figure. In fact, a college’s EFC calculation does not take into account household debt, which can certainly contribute to surprise over the EFC amount. For this reason, it is advisable to calculate the EFC before the student applies to college.

Calculating the EFC in advance of applying to colleges is also helpful because it can provide some guidance in the selection process. The total cost of attendance minus EFC will provide an indication of how much financial aid will be needed. The higher the need for financial aid, the more likely it is that the school may be out of reach financially. Families are well advised to also research the financial aid trends at the schools their children are considering as some schools are notably more generous than others in their financial aid packages.

The EFC is, of course, only an estimate and does not purport to be an amount the student’s family can realistically afford. For this reason, it is particularly important for the student’s family to figure out a realistic contribution amount and for the student to matriculate at a college that is within this budget. Selecting an affordable college is one of the best steps that can be taken toward not only starting college but also completing it.

It is also important to note that EFC may be a misnomer for another reason; a student’s family may not even be a part of the college planning process. A student may not be receiving any assistance from family, and although the student can report this information to the college, the EFC will not likely be changed. It will then be the student’s responsibility, through careful planning, to close this gap or select a more cost-efficient school.

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