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Planning for Education Expenses

College Planning Investing

Why You Should Not Plan to Rely on Financial Aid Alone

Over the past decade the cost of higher education, including tuition, fees, room and board, rose at average rates of 1.9% per year at public four-year and 1.8% per year at private nonprofit four-year institutions[i].  Expenses vary substantially according to institution type.

Federal and state governments offer various means based financial aid programs in addition to loans. The most generous aid program is the Federal Pell Grant which is a grant that does not need to be repaid and is intended for families with exceptional need, e.g. annual income less than $30,000[i]. For those who qualify, the maximum Federal Pell Grant award is only $6,195 for the 2019–20 award year[ii].

The most generous Federal loan program, the Stafford loan, offers both need-based (subsidized) and non-need based (unsubsidized) packages with interest rates that do not exceed 8.25 percent[iii]. The program only offers loans up to $20,500 annually however, leaving a funding deficit for most four-year higher education programs.

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