It’s never too late to start. If you’ve got a ninth grader, tuck $250 a month into a high-yield bank savings account. In four years, you could have more than $12,500. Consider upping that percentage if your kids take on regular after-school and summer jobs in high school. And make it a family project to scope out scholarships long before senior year. Go to Cappex for a free database of scholarships. When your kid applies to college, you submit one or more detailed financial applications. The federal one is called the Free Application for Federal Student Aid (FAFSA). Many colleges also require the CSS Profile application for institutional aid, and some have their own financial aid application. From the information on these forms, the school will determine your EFC for freshman year. You can get a general estimate right now with the free EFC calculator from CollegeBoard. “Focus on schools where the out-of-pocket expenses make the most sense for your budget,” says Messinger. “With a lower net price, a private college could cost less than an in-state public school,” says certified financial planner David L. Martin, president of Advanced College Planning in Rocky Hill, Conn. Divide the estimated net price for freshman year by your adjusted gross income (on your federal tax return), says Kantrowitz. If the result is above 25 percent, that’s a sign the college may require you to borrow too much. Martin advises clients to also fill out all other aid forms. Think of them as insurance. An illness, layoff, or divorce can drastically change a family’s needs. “Many schools won’t consider you for aid later if you don’t file the FAFSA the first year,” says Martin. Kantrowitz says that if students borrow no more than what they expect to make their first year out of school, and if parents borrow no more than a year’s gross income (to pay for all kids combined), they should be in good financial shape. “I encourage having the student borrow first. It’s a way for them to get some skin in the game,” says Schultz. Students with need-based loans are not charged interest while they’re in school. And student loans have a fantastic built-in guardrail: The current annual borrowing limit ranges from $5,500 for freshmen to $7,500 for juniors and seniors, so sticking to federal student loans protects against overborrowing. Avoid private loans, which often have variable interest rates (all federal loans are fixed-rate) and lack the flexible repayment options offered to federal-loan borrowers. Kantrowitz recommends aiming for the standard 10-year payback period for federal loans. Even though there are repayment plans that give you more time, you’ll end up paying more in interest. Enroll in autopay, which will pull your payment from your bank account each month so you stay on track. Some servicers give you a 0.25 percent reduction on your loan interest rate for doing so. If you work full-time at a nonprofit or for the government, you may qualify for the Public Service Loan Forgiveness Program, which will wipe out any remaining debt after you make 120 consecutive on-time monthly payments.
