News Column

A Helping Hand in Financing Education

January 27, 2014

Adam, Michelle

A Helping Hand in Financing Education

When Mark Kantrowitz attended Massachusetts Institute of Technology (MIT) several decades ago, he didn't plan on becoming an expert in financial aid for college. He obtained a bachelor's degree in mathematics and philosophy from MIT and a master's degree in computer science from Carnegie Mellon University and was head of his own consulting firm. Yet, his success in financing his higher education - he paid for it all with scholarships and had plenty of money to spare after graduating -set him on a path as a nationally-recognized expert on student financial aid, scholarships, and student loans.

"After publishing a book about scholarships for math and science students in 1993, I began receiving many questions about planning and paying for college by email," said Kantrowitz. "Since the Web had just started, I posted the answers on a Web page and responded with instructions about how to access the web. I began proactively answering questions before they were asked, and then the website took on a life of its own."

He established FinAid, an online source for financial advice, in 1994 in order to answer students' financial aid questions, and to offer articles and pieces on issues that addressed concerns in this area. Since then, he's been quoted in more than 5,000 newspaper and magazine articles; has written books on scholarships and financial aid; and has contributed to major news sources such as The New York Times, The Washington Post, and Time magazine. Today, Kantrowitz works as senior vice president and publisher of Edvisors Network (, an online student resource center that provides information, advice, and tools to help students further their education. He left FinAid last year.

When it comes to financing an education, Kantrowitz is convinced that despite the recent economic downturn, college is still a worthwhile investment for most students, but it takes a lot of diligence and work.

His first basic advice for current students is to fill out the FAFSA (Free Application for Federal Student Aid) form, even if they didn't receive any aid last year. The form itself can be complicated to fill out, and its nature often deters some students from completing it. However, help is available through (800)-FED-AID and other sources.

To add to the challenges of finding enough money for college, the Pell Grant program has not kept up with inflation and rising college costs, making some students wonder if college is even worth pursuing. It is, though, explained Kantrowitz, since people with college degrees generally earn more money than people with just a high school diploma.

Beyond federal grants, it is important to apply for every scholarship one is eligible for - even those that are only $500. "Every dollar you win is a dollar less you'll have to borrow," he said, and pointed out that after completing a few applications you can reuse materials that will help streamline the application process.

When it comes to minority scholarships, Kantrowitz added, "There's a belief that there are more scholarships for minorities than whites, but this isn't true. White students are 40 percent more likely to win private scholarships than minority students. Yet, there are many scholarships for Hispanics and minorities that need more applicants, like that of the Gates Foundation, and the money is there."

Because applying for financial aid can be cumbersome, students might think it is better to attend a two-year college or work while in college as a quick solution to making school more affordable, rather than seeking grants. Kantrowitz offers cautions about these strategies. "Of students who intend to obtain a bachelor's degree, only about a fifth of those who start at a community college graduate with a bachelor's degree within six years," he said. "That compares with two-thirds of students who start off at a four-year institution. Also, those who work full time while in college are half as likely to complete their education as students who work 12 hours a week or less."

Another bit of advice Kantrowitz offers students is to be careful with their cost versus quality analysis of schools. "Lots of schools give a bottom-line cost figure that is misleading because it includes loans," he said. "Loans do not cut college costs. Every dollar you borrow will cost about two dollars by the time you repay the debt."

Today, more than 1,600 schools have voluntarily become a part of the Consumer Financial Protection Bureau's online college cost-comparison tool that allows those applying to colleges and universities to compare the net price of one to the other. "It is not a requirement for schools to use the Financial Aid Shopping Sheet, but it should be required to enable families to make informed decisions about college costs. I believe it will be in the future," Kantrowitz added.

The White House also unveiled an interactive "College Scorecard" website last February that allows anyone to retrieve the net cost of attending a particular college, along with data on student loan repayment and loan default and graduation rates.

Aside from looking carefully at the net price, Kantrowitz said not to dismiss any college right away due to cost. Six dozen or more elite colleges, including the Ivy League institutions, do not include loans in their financial aid package. For example, Princeton University undergraduate students graduate with only an average of $5,000 to $6,000 in student loan debt because the school is so generous, according to Kantrowitz.

Another tip this financial aid advisor gave was for families to save as much as possible prior to college rather than relying on loans - even if it's just putting aside a little bit each month. "It is cheaper to save than to borrow," he said. "Even if it's a small amount, saving for a child's college education increases the likelihood that they will go to college."

Some families invest in 529 college savings plans that help them put aside money for college tuition and expenses with some tax benefits. Earnings placed into these plans are federal income tax-free as long as withdrawals are used for higher education expenses such as tuition, fees, books, certain equipment, and reasonable costs of room and board. Many of these programs are state-run, and some might be more effective than others, but San Francisco has taken one step further and has enrolled all newborns in their 529 with a bit of starter cash.

"Low-income families seem more willing to sacrifice for their children's college educations than middle to upper-class families, despite their limited means. Wealthier or middleclass families want their own kids to pay all college costs, which is not very realistic," said Kantrowitz. "Also, some don't save for college out of fear that they will receive smaller grant aid. While this is true, the amount you lose in grants is small and still shouldn't stop you from saving. Loans will double the cost after completing college, which is a lot worse."

The final bit of advice Kantrowitz offered is for students to be careful of spending too much while in college. "Live like a college student when you are in college, so you don't have to five like a student when you graduate," he said. "Eating out even once a week can add up. A $10 pizza each week will add about $2,000 in expenses by the time you graduate. If you use student loan money to pay for the pizza, it will cost about $4,000 by the time you repay the debt. Another tip is to buy used textbooks and resell them at the end of the semester."

While students seem to be more careful now more than ever about college finances, especially since many wonder if they'll even be able to get a good job in this economy upon graduating, the federal government hasn't made getting a higher education any easier. "Congress is looking for ways to cut the grants when we should be investing more. If we were to triple the average federal Pell Grant, we'd have hundreds of thousands of more students graduating. The cost would still be a drop in the bucket compared to what we spend on defense. And education is just as strategically important for the nation," said Kantrowitz. "It is typical, though, during a recession, to have cutbacks in education due to lower tax revenues, and even after a recession it often takes years before we reinvest in education."

The consequence of a tighter national belt is that college becomes unaffordable for many lower-income students. The failure of grants to keep pace with college costs is pricing lowincome students out of a college education (college-capable low-income students enroll in college at one quarter of the rate of high-income students). But, it is these students who especially need to find creative ways to finance their education so they're not left behind. And according to Kantrowitz there are options, although it's important to follow his advice and find the help that is available.

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: Hispanic Outlook in Higher Education, The

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