Financial Literacy: College Costs and Financial Aid
Understanding tuition, aid, loans, and true college costs
Financial Literacy: College Costs and Financial Aid
Understanding tuition, aid, loans, and true college costs
Financial Literacy - Grade 9-12
- 1
A college lists tuition and fees as $14,000 per year, housing and meals as $11,500, books and supplies as $1,200, transportation as $900, and personal expenses as $1,600. What is the total estimated cost of attendance for one year?
Cost of attendance includes both direct costs, such as tuition, and indirect costs, such as books and transportation.
The total estimated cost of attendance is $29,200. This is found by adding $14,000, $11,500, $1,200, $900, and $1,600. - 2
A student receives a $6,000 scholarship and a $4,500 grant. The college's cost of attendance is $28,000 for one year. What is the student's net price before loans or work-study?
The student's net price is $17,500. This is calculated by subtracting the $10,500 in scholarships and grants from the $28,000 cost of attendance. - 3
Explain the difference between a grant and a student loan.
Focus on whether the money must be paid back.
A grant is financial aid that usually does not need to be repaid if the student meets the requirements. A student loan is borrowed money that must be repaid later, usually with interest. - 4
Two colleges have the same sticker price of $35,000 per year. College A offers $18,000 in grants and scholarships. College B offers $10,000 in grants and scholarships. Which college has the lower net price, and by how much?
College A has the lower net price by $8,000. College A's net price is $17,000, while College B's net price is $25,000. - 5
A student is offered a federal work-study award of $2,000. Explain why this amount may not be applied to the bill in the same way as a grant.
Think about the difference between being awarded money and earning wages from a job.
Work-study is money the student earns by working an approved job. It is usually paid as wages over time, so it may help with expenses but may not reduce the bill immediately like a grant does. - 6
A student borrows $5,500 for the first year of college at a 5% annual simple interest rate. If interest accrues for one year, how much interest is added?
The interest added for one year is $275. This is calculated by multiplying $5,500 by 0.05. - 7
A financial aid award letter lists a $7,500 federal loan as part of the aid package. Why should a student be careful when comparing this offer to an offer with more grants and scholarships?
Not all financial aid lowers the final cost in the same way.
The student should be careful because loans must be repaid with interest, while grants and scholarships usually do not need to be repaid. An aid package with more loans may cost more in the long run. - 8
College X has a net price of $16,000 per year. College Y has a net price of $19,500 per year. If a student attends for 4 years and costs stay the same, how much more would College Y cost than College X?
College Y would cost $14,000 more over 4 years. The yearly difference is $3,500, and $3,500 multiplied by 4 equals $14,000. - 9
A student has saved $3,200 for college. Their family can contribute $2,500 for the year. The student's net price is $12,000. How much remains to be covered by additional aid, work, or loans?
First add the savings and family contribution, then subtract from the net price.
The student still needs to cover $6,300. The student and family together have $5,700, and $12,000 minus $5,700 equals $6,300. - 10
Look at this aid package: $9,000 grant, $2,000 scholarship, $3,500 subsidized loan, $2,000 unsubsidized loan, and $1,500 work-study. What is the total amount of gift aid in the package?
The total gift aid is $11,000. Gift aid includes the $9,000 grant and the $2,000 scholarship because these usually do not need to be repaid. - 11
Explain why students should consider graduation rates, major availability, and living costs in addition to tuition when choosing a college.
A lower tuition price does not always mean a lower total cost or a better fit.
Students should consider these factors because the best financial choice is not based only on tuition. Graduation rates can affect how long a student pays for school, major availability affects career goals, and living costs affect the total amount needed each year. - 12
A student compares two ways to cover a $4,000 gap. Option 1 is a scholarship for $4,000. Option 2 is a loan for $4,000 at 6% annual simple interest for 3 years. How much more would the loan cost than the scholarship after 3 years of interest?
The loan would cost $720 more than the scholarship after 3 years of interest. The interest is $4,000 multiplied by 0.06 multiplied by 3, which equals $720, while the scholarship does not need to be repaid.