This discussion was created from comments split from: How accurate are the net price calculators?.
Can someone explain to me the implications of self employment with regards to financial aid? I am a freelancer, sole proprietor of my business. My income varies. My income plus my husband’s income puts us squarely into what I’d consider middle class. We likely make too much to get much need-based aid and frankly don’t make enough that we can afford to take out additional loans. We have 20,000 saved for our daughter. I’ve been operating under the assumption that we should start touring schools (she is a junior) and see what type of school she likes and then fill out the FAFSA, apply to colleges and see what she gets. After touring several schools, I’m now starting to panic because frankly, none of them are affordable without tons of loans and we are looking at state schools and universities. She is a good student, taking all honors and AP classes. She would likely be a candidate for some merit-based scholarships but we really won’t know until she applies. How are people doing this? What is realistic in terms of student loan debt? Is my business somehow going to hurt our chances of financial aid? No matter how I do the math, I cannot see a reasonable way of paying for a 4-year university.
This is NOT true at all schools. There are some colleges that give guaranteed merit aid for certain stats. You would know if your daughter qualified for these before applying.
So…what are her SAT or ACT scores…and her GPA?
How much CAN you pay annually for her college education?
Are your instate public universities unaffordable also?
What majors is she considering?
Any geographic limitations?
In terms of STUDENT loans…your daughter alone can take the following Direct Loan amounts:
Different people can have very different definitions of “middle class,” so unless anyone knows what your AGI is, it’s hard to confirm that you probably won’t get much need-based aid. That being said, there are a good number of schools that provide need-based aid even for students that come from a family with an AGI of $150k+. Yes, these are typically very selective schools, but it sounds like your daughter might be competitive. The factor that may work against you is your self employment status, which can make it hard to reasonably forecast the EFC that a school will calculate for institutional aid.
You choose wisely. You find a school that will give her merit aid, she works, she borrows the federal loans (not you), you contribute what you can ($5000 from the savings, another $4-5k from your current income?).
If she likes big schools, look for some that give big scholarships, that cost less to being with (west or south). If she likes smaller LACs, there are some in the south that don’t cost that much and give scholarships. Flagler in St Augustine Florida is really nice and doesn’t cost that much.
What you can’t do with a limited budget is just tour schools assuming they’ll all work. You have to look at the COA. Open up the geography. Look at schools that may not be perfect but that you can make work. Look in your own state as there might be state grants or discounts.
You say your income varies, but is there a way to make it not vary? Take a job working for a company, or take a long term contract?
You build a college list from the bottom up. Start with schools that are financial safeties – where the student is virtualy assured of admissions and that you are sure you can afford. Maybe schools that give guaranteed full tuition or fullride scholarships based on test scores and/or GPA, or maybe in-state publics. Have 2 or 3 in order that the student have a choice --unless you are fortunate enough that there is a safety the student truly loves.
So that’s your foundation. And after that everything allow the student to apply widely, with the understanding that the admission depends on finances. She may be disappointed in the end-- or she may be pleasantly surprised. But in the end there’s all that big a difference between applying to a reach school and being rejected; or applying to a reach school, getting accepted,but then realizing it is unaffordable. Either way the student has applied to a college she can’t attend. Either way there is disappointment, but the student will get over it.
The problems come when the students or parent are blindsighted in April, because the parents assumed more aid will be forthcoming, or because the parents were not proactive and forthcoming in explaining financial limitations to the student.
If you are a freelancer with fluctuating income, you are already used to uncertainty in your life. The college financial aid process is just one more area of uncertainty.
When my kids applied to colleges I was a divorced parent, self-employed, non-custodial ex was also self employed as well as non-contributing, plus I had home equity that added a further unknown to the equation. Financial aid offers were all over the map, but my kids did end up with workable packages at good colleges.
That’s a typical private school. Rich people can afford full price. Poor people can usually get the most need based aid. It’s usually the middle class that get squeezed out of these schools. If your daughter is a junior, then she has plenty of time to get scholarships. The schools in the deep south like, Alabama, Auburn, Ole Miss, Mississippi State, and LSU tend to offer very generous nonresident scholarships. That’s because the south is less densly populated, so they need to attract more people out of state.
You don’t want your daughter taking out tons of student loans to pay for these exotic private schools. It’s a sure fire set-up for failure, especially when her career is young and she’s in an entry-level job.
@ALP1013 people here may be able to help you come up with some ideas but will need more info.
What can you reasonably pay a year with no loans? This is important because what isn’t “too much” to one person could be “no way I can afford that” to someone else. For example, Flagler was mentioned above. It is a great cost for a 4 year private at $30k a year for tuition, room and board. But from my understanding, merit tops out at 4K and it would be hard to predict what need based aid you would get, so you can’t count on it. Could you afford $26k minus a student loan of $5500? If yes, and if it has the major your d is interested in (it doesn’t have engineering, so it wouldn’t work for my d19 but might for my d22), it could be a good likely college for her. If you only could afford it if she got more need based aid, it might still work as a financial reach.
What major is she interested in?
What state are you in? Some states have great public universities. Some have great community college to 4 year plans.
What are her stats? Some schools have amazing automatic scholarships for certain GPA and SAT/ACT thresholds and have high admittance rates.
Are there any college fit factors that are non negotiable for her? Some kids refuse to travel far, some refuse cold weather or hot weather, some refuse religious schools, some refuse small or large or rural or city, etc. How open is your daughter to different types? What has she liked the most so far?
Since Flagler has been mentioned, I’m starting there in the fall and out of all the (nine) schools I was accepted to Flagler gave me the most generous financial aid. I’m not middle class, I have an EFC of $0, but will be able to pay the remaining costs because of an outside scholarship and the increase in tuition assistance at McDonald’s.
Is she interested in going to grad school? If yes, I would recommend a community college or instate college. And like others have asked on the thread, the state you live in, her stats, and her possible major(s).