The Path to College
Better tax breaks and loan terms mean strapped families can still pay their way
By WALECIA KONRAD
The recession and the market crash haven’t just decimated
retirement savings. They’ve also toppled many families’ college
savings plans. And much like your investment accounts and home
equity, college endowments have shrunk in the past year, pinching
the ability of some schools to offer grants and scholarships. Meanwhile, private student loans are harder to get—the dollar amount
of loans issued last year dropped about 30 percent as banks raised
lending standards—and tuition costs
continue to rise faster than inflation.
“The landscape has gotten a lot more
complicated,” says Mark Kantrowitz of
FinAid.org, a student-aid website.
The federal government has re-
sponded by broadening loan programs
for students—offering more loans, more
money, and better rates—and increas-
ing tax breaks for parents: an expanded
tuition credit for households with up
to $160,000 in adjusted gross income
could trim as much as $2,500 from your
tax bill. Still, the economic downturn
means many families need to rethink
how much they’ll need to borrow.
Here’s a quick guide to current obsta-
cles—and how to get around them.
THE OBSTACLE “I just lost my job. My
daughter starts college this fall, and
now I can’t afford it.”
WHAT TO DO If you haven’t already
done so, fill out the Free Application for
Federal Student Aid (FAFSA), the form
that colleges usually require before
awarding aid, from merit scholarships
to need-based grants and loans. Submit
it to your daughter’s school with a letter
explaining your situation. (Updating
the financial-aid office is a good idea
whenever your income or net worth
drops—after a divorce, for example.)
If your daughter already has an aid
package and needs to increase it, check
the college’s website or call to see if
there’s a formal appeals process. If
there isn’t, write a letter to the director
of financial aid. Make your case clearly,
and be honest about the difficulties
you’re facing and how much your child
wants to attend. “Remember, a human
being is reading this on the other end,”
says Kevin Simme, head of College
Funding Alternatives in Princeton
Junction, New Jersey. Follow up with a
phone call or even a brief visit.
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THE OBSTACLE “My home’s value has
sunk, so I can’t borrow on the equity
for my son’s tuition, as I’d planned.”
WHAT TO DO No equity? Don’t panic.
Before taking a loan in your name,
look into federal student loans your
son can get. Federal dollars have increased, and they might again. For
example, the Federal Perkins Loan
Program would balloon to $6 bil-
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