MONEY College

Principal: Colleges’ Chintzy Financial Aid Offers Betray the American Dream

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iStock

Colleges and states are expecting students to take on an insane amount of debt.

Editor’s note: One of the nation’s leading public high school principals, a 2014 winner of the prestigious Harold W. McGraw Jr. Prize in Education, wrote this after viewing the financial aid awards sent by colleges to the seniors at his Philadelphia magnet high school. Two-thirds of his students at the Science Leadership Academy are minorities, and one-third are considered economically disadvantaged.

This year has been a fantastic year for Science Leadership Academy college acceptances. We’ve seen our kids get into some of the most well-respected schools in record numbers—and many of our kids are the first SLA-ers to ever get accepted into these schools.

Whether or not they are able to go to is another question.

Today, I was sitting with one of our SLA seniors. She’s gotten into a wonderful college—her top choice. The school costs $54,000 a year. Her mother makes less than the federal deep poverty level. She only received the federal financial aid package with no aid from the school, which means that, should she go to this school, she would graduate with approximately $200,000 of debt.

She would graduate with approximately $200,000 of debt—for a bachelor’s degree.

Now, how in good conscience could a college do that? I’ve sat with kids as they’ve opened the emails from their top choice schools. Watching the excitement of getting into a dream school is one of the real joys of being a principal. It’s just the best feeling to see a student have that moment where a goal is reached.

And as amazing as that moment is … that’s how horrible it is to sit with a student when they get the financial aid package and counsel them that the school just isn’t worth that much debt.

I sat with my student today and pulled up a student loan calculator. I showed her that $200,000 of debt would mean payments of $1,500 a month until she was 52 years old—and then we pulled up a budgeting tool so she saw how much she would have to make just to be able to barely get by.

(Are you in the same situation? Here’s how to negotiate for more aid.)

Then we looked at the state schools she’s gotten into, and we talked about what it would mean to be $60,000 in debt after four years, because Pennsylvania has had so much cut from higher education that Penn State is now $27,000 / year—in state, and we’ve noticed that their financial aid packages have dropped by quite a bit.

So we have to tell the kids to apply to the private schools because the aid packages the kids get from private colleges are sometimes significantly better than what the public schools are offering. Kids have to apply to a wide range of schools and hope. And then we sit down with kids and help them make sane choices, as the $60K a year schools send amazing brochures and promises of semesters abroad and pictures of brand new multi-million dollar campuses, all while promising that there are plenty of ways to finance their tuition.

(Check out Money’s lists of the 100 Best Private Colleges For Students Who Don’t Want To Borrow, 25 Most Affordable Colleges and the 10 Colleges With The Most Generous Financial Aid.)

Dear colleges—you are doing this wrong.

It doesn’t have to be this way. When I was a teacher in New York City even as recently as ten years ago, I felt that kids could go to amazing and affordable CUNY and SUNY schools if the private schools didn’t give the aid the kids needed. But Pennsylvania ranks 47th out of 50 in higher ed spending by state, and as a result, seven of the top 14 state colleges are in Pennsylvania.

And as private colleges hit times of financial crisis and public colleges become more tuition dependent, students are being asked to take out more and more loans, which is putting a generation of working class and middle class students tens—if not hundreds—of thousands of dollars in debt to start their adult lives.

The thing is—I still powerfully agree with those who say that a college education is a worthwhile investment. And on the aggregate, it is true – especially because the union manufacturing jobs of the last century have been lost. But when we look at the individual child, and the choices that kids and families are being asked to make, we have to ask how we can ask kids to take that kind of risk and take on that kind of debt.

Of course, all of this is exacerbated for kids from economically challenged families and for kids who are the first in their families to go to college. And if you are thinking about leaving a comment about kids getting jobs in college to help make it affordable, you show me the job market for college kids to make $30,000 a year while in school full-time. I must have missed those listings in the morning paper.

A college education can—and should—be a pathway to the middle class.

Colleges should have a moral responsibility to offer sane packages that don’t saddle students with unimaginable debt to start their adult lives.

Work hard, go to college, live a meaningful life. That is what we hear promised to children all the time from President Obama to parents across America.

Colleges and universities have to be honest and fair agents in that dream. Asking students to take out $30,000 and $40,000 of debt a year for access to that dream is a betrayal of the educational values so many of us hold dear.

Chris Lehmann is the founding principal of the Science Leadership Academy, a Philadelphia public high school. This story first appeared on his blog, Practical Theory.

MONEY College

The 25 Public Colleges Where Students Graduate The Fastest

Final exercises, University of Virginia
Dan Addison—U.Va. Public Affairs At the University of Virginia, 86% of freshman graduation in four years.

The schools that will help you avoid the wasted time and added expense of spending a fifth year (or more) in the classroom.

One casualty of the ongoing budget problems and overcrowding at public colleges is speed. The average time public college students take to earn what used to be called a “four-year degree” is currently about 4.6 years.

In fact, only one third of public college students earn their bachelor’s degree in four years, according to the U.S. Department of Education.

And that means the average in-state public college student is paying for an additional semester of tuition, room, board, and books—which is currently running about $12,000, according to College Board data.

Many private college students need more than four years to graduate as well, but on average, fully 53% of private college students earn their bachelors’ degree on time, 20 percentage points higher than the public college rate. (For the private colleges that graduate students the fastest, see our list of the top 50.)

One major cause of students’ slower progress at public colleges is underfunding. At some colleges, such as some low-cost California State University campuses, students complain they can’t get into the majors or classes they need to complete their degrees. At several CSU campuses, such as San Jose State University, students have almost no chance to finish on time.

But students also slow themselves down, research shows. Generally, schools that accept students with less-than-perfect high school records—such as open access public colleges—tend to have low four-year graduation rates. Many struggling students have to take remedial classes before they can handle college-level work, which adds a semester or two to their degree.

And students who change majors late in their college career may have to take additional requirements, which can force them to spend an extra semester or two at school. (You can read more about the simple strategies to help you graduate on time here.

These 25 public colleges have the best records of graduating students on time. They are ranked by four-year graduation rates in the table below, which also lists Money’s best college values ranking and our estimate of the average cost of a degree for an in-state student, after college scholarships and grants are subtracted.

College state Money ranking % of freshmen who earn a bachelor’s in 4 years Estimated average net cost of a degree for the class of 2019
1. University of Virginia-Main Campus VA 16 86% $96,963
2. College of William and Mary VA 60 83% $99,106
3. University of North Carolina at Chapel Hill NC 40 81% $86,637
4. University of Michigan-Ann Arbor MI 22 76% $97,359
5. University of California-Berkeley CA 13 72% $130,629
6. The College of New Jersey NJ 53 72% $131,357
7. St Mary’s College of Maryland MD 319 71% $123,480
8. University of California-Los Angeles CA 31 69% $130,477
9. SUNY at Binghamton NY 162 69% $102,165
10. University of California-Irvine CA 32 68% $126,546
11. University of California-Santa Barbara CA 95 68% $135,233
12. University of Connecticut CT 120 68% $105,084
13. University of Delaware DE 66 68% $101,911
14. University of Illinois at Urbana-Champaign IL 76 68% $122,217
15. Miami University-Oxford OH 144 68% $128,987
16. University of Maryland-College Park MD 68 66% $102,069
17. SUNY College at Geneseo NY 359 66% $98,680
18. University of Mary Washington VA 107 66% $101,952
19. University of Florida FL 28 65% $89,572
20. Pennsylvania State University-Main Campus PA 177 65% $147,090
21. James Madison University VA 53 65% $101,193
22. University of Vermont VT 300 65% $96,549
23. University of New Hampshire-Main Campus NH 261 64% $121,657
24. University of Pittsburgh-Pittsburgh Campus PA 319 64% $133,585
25. Citadel Military College of South Carolina SC 114 62% $98,671

Sources: U.S. Department of Education, Money calculations

MONEY College

4 Ways To Spend One Less Semester in College—and Save

Students walking on El Paseo de Cesar Chavez street on San Jose State University campus, California
Ellen Isaacs—Alamy San Jose State University, where the average student takes more than five years to graduate.

The average college graduate takes an extra semester to earn a degree. Here's how you can finish up in four years and avoid those additional costs.

In all the paperwork sent by colleges in those fat acceptance envelopes mailed out in the spring, one distressing fact is typically being left out: You’re probably going to pay at least one extra semester’s worth of tuition.

If past trends continue, only about 40% of the freshmen who start at a four-year college this fall will earn their bachelor’s in four years, according to the U.S. Department of Education.

Another 15% will take five years. A few more stragglers will need six years or more, while 41% percent of freshmen won’t ever earn a bachelor’s degree. Overall, the average student who does graduate takes 4.4 years to earn a degree.

That means the typical student is paying for one extra semester of school, since about two-thirds of the students who need extra time are taking courses full-time and paying full tuition all the way through, according to analyses by Judith Scott-Clayton, an economist at Teachers’ College, Columbia University.

But Scott-Clayton and other experts say there are four things you can do to reduce the odds that you’ll have to pay for more than four years of college.

1. Bank credits in high school. Peter Van Buskirk, a former dean of admissions at Franklin & Marshall who now runs the Best College Fit private consulting firm, urges students to earn early college credits and perhaps place out of some requirements by taking advanced placement tests in high school. Once you’ve exhausted all your opportunities at your high school, another option is to enroll in other college credit courses, such as community college or online classes.

2. Take a full load at college. Part of the problem is that the federal government classifies 12 credits a semester and above as “full-time attendance,” says Scott-Clayton. So lots of students think taking 12 credits is sufficient.

But at that rate you’ll need 10 semesters (five years) to earn the standard 120-credit requirement for a bachelor’s. Your first college math lesson: The only way to earn 120 credits in four years is to earn at least 30 per year, which means 15 per semester.

4. Test your major early. Take courses and internships related to your major in freshman and sophomore years so you can quickly find out if you want to switch.

Switching majors in junior and senior year is a common cause of graduation delays, says Jim Briggs, a founder of Reducing College Costs, a private financial aid consulting firm. “If you change your major and there are prerequisites that are only offered once in a year, you might be out of luck,” Briggs explains.

4. Find a college that’s on your side. Choose a college that has a track record of helping students finish on time. Students at public colleges that have been hit hard by budget cuts and overcrowding, such as many campuses of the California State University system, often can’t get into the courses they need to finish their degree. At several CSU campuses, such as San Jose State University, students have almost no chance of finishing on time. Only 8% of full-time entering SJSU freshmen earn their degrees in four years, and the average student needs slightly more than five years.

But even some expensive private colleges, such as the Brooklyn campus of Long Island University, report very low four-year graduation rates.

You can look up your college’s four-year graduation rate on the U.S. Department of Education’s College Navigator website. And check out Money’s list of the 50 private colleges and 25 public colleges most likely to get you to graduation in four years.

MONEY College

Don’t Be Too Generous With College Money: One Financial Adviser’s Story

When torn between paying for a child's education or saving for retirement, parents should save for themselves. Here's why.

Saving money isn’t as easy — or as straightforward — as it used to be. Often, people find they have to delay retirement and work longer to reach their financial goals. In fact, one of the most common issues parents face these days is how to save for both retirement and a child’s college fund.

Last month, for example, I met with a couple who wanted to open college savings funds for each of their three children. They were already contributing the maximums to their 401(k)s with employer matches. I applauded their financial foresight; it’s great to see people thinking ahead.

Then I gave them my honest, professional opinion: Putting a lot of money into college funds isn’t going to help if their retirement savings suffer as a result. Sure, they’ll have an easier time paying tuition in the short term, but down the road their kids may end up having to support them — right when they should be saving for their own retirement.

The tug-of-war between clients’ retirement and their children’s education can lead to difficult conversations with clients, and difficult conversations between clients and their children. Who wants to deprive their children of their dreams and of their top-choice school?

I try to be matter-of-fact with my clients about this sensitive subject. I start with data: If you have x amount of money and you need to put y amount away for your own retirement, you only have z amount left over for your children’s college.

I also talk a little about my own experience — how my parents were able to write a check for my college tuition. But college was less expensive then, and costs were a much smaller percentage of their salary than they would be today. Times have changed.

As much as we all want to be friends with our children, we have to put that aside. I tell people that if they don’t know whether they should put their money in a 529 account or their retirement account, they should put it in their retirement account. Financial planners commonly point out that you can get a loan for college but you can’t get one for retirement.

I don’t think people realize that. I think that they just want to do right by their children.

After I talk about my own experience, I move on to my recommendation. I tell clients that one way to approach this issue with their children is to make them partners in this venture. Tell them that you’re going to pay a portion of the cost of education. Set a budget for what you can afford, then work with them to find a way to fill in the gaps. Make a commitment, then stick to it.

I explain to my clients that choosing their retirement doesn’t mean that they can’t help your children financially and it doesn’t mean they are being a bad parent or are being selfish. It does mean that they should prioritize saving for retirement.

When clients tell me that they feel guilty for putting their retirement first, I ask them this: “Where is the benefit in saving for your children’s college but not for your own retirement?” Without a substantial nest egg, I tell them, you could end up being a burden on your children when you’re older.

And there’s an added bonus, I tell them: If your kids see you putting your retirement first, it might teach them about the importance of saving for their own retirement. That could end up being the best payoff of all.

Read Next: Don’t Save for College If It Means Wrecking Your Retirement

———-

Sally Brandon is vice president of client services for Rebalance IRA, a retirement-focused investment advisory firm with almost $250 million of assets under management. In this role, she manages a wide range of retirement investing needs for over 350 clients. Sally earned her BA from UCLA and an MBA from USC.

MONEY Retirement

Don’t Save for College If It Means Wrecking Your Retirement

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Mark Poprocki—Mark Poprocki

When you short-change retirement savings to pay for the kids' college, they may end up paying way more than the price of tuition to support you in later life.

Making personal sacrifices for the good of your children is Parenting 101. But there are limits, and financial advisers roundly agree that your retirement security should not be on the table.

Still, parents short-change their retirement plans all the time, often to set aside money for Junior to go college. More than half of parents agree that this is a worthwhile trade-off, according to a T. Rowe Price survey last year. Digging into the reasons, the fund company followed up with new results this month. In part, researchers found:

  • Depleting savings is a habit. Parents say it is no big deal to steal from retirement savings. Some 58% have dipped into a retirement account at least once—most often to pay down debt, pay day-to-day living expenses, or tide the family over during a period of underemployment.
  • Many plan to work forever. About half of parents say they are destined to work as long as they are physically able—so why bother saving? Among those who plan to retire, about half say they would be willing to delay their plans or get a part-time job in order to pay for college for their kids.
  • Student debt scares them. More than half of parents say spending retirement money is preferable to their kids graduating with student debt and starting life in a hole. They speak from experience. Just under half of parents say they left college with student debt and it has hurt their finances.

We love our kids, and the past seven years have been especially tough on young adults trying to launch. So we shield them from some of life’s financial horrors, indulging them when they ask for support or boomerang home—to the point that we have created a whole new life phase called emerging adulthood.

Yet you may not be doing the kids any favors when you rob from your future self to keep them from piling up student loans today. Paying for college when you should be paying for your retirement increases the likelihood that they will end up paying for you in old age, and that is no bargain. They may have to sacrifice career opportunities or income in order to be near you. You’ll go into assisted living before you become a burden on the kids? Fine. At $77,380 per person per year for long-term care, it could take a lot more resources than the cost of borrowing for tuition.

It sounds cold to put yourself first. But the reality is that your kids can borrow to go to school; you cannot borrow to retire. So get rid of the guilt. Some 63% of parents feel guilty that they cannot fully pay for college and 58% feel like a failure, T. Rowe Price found. Nonsense. Paying for college for the kids is great if it does not derail your savings plan. But if it does that burden must become theirs. That’s Parenting 101, rightly understood.

Read next: Don’t Be Too Generous With College Money: One Financial Adviser’s Story

MONEY Student Loans

6 Ways the New ‘Student Aid Bill Of Rights’ Will Help Borrowers

President Barack Obama speaks at Georgia Tech
David Goldman—AP

On Tuesday President Obama proposed some relief, but experts say more is needed.

President Barack Obama on Tuesday proposed a “student aid bill of rights” that offers about a half-dozen small but important improvements for the 40 million Americans who are dealing with student loans.

While congressional action would be needed to make significant changes in the student loan program, President Obama has ordered the Department of Education to take steps by 2016 to make things simpler and easier for student borrowers.

In a speech at Georgia Tech, the president said the federal government will now “require that the businesses that service your loans provide clear information about how much you owe, what your options are for repaying it, and if you’re falling behind, help you get back in good standing with reasonable fees on a reasonable timeline.” The reforms announced today will:

1. Create a centralized website that makes it easy to file complaints and to see all your student loans in one place. Jesse O’Connell, assistant director of federal relations for the National Association of Student Financial Aid Administrators, said many students are confused by the government’s use of contractors to collect their loans. Some borrowers who receive letters from these anonymous-sounding private companies, such as Navient (a spinoff of Sallie Mae), throw the letters away, thinking they are identity theft scams. A simple centralized website where borrowers could see all their student debt information, payment amounts, and due dates is a “basic consumer-friendly protection,” O’Connell said.

2. Try having federal employees collecting debts instead of private contractors. The Department of Education is already working with the Department of the Treasury to test out having federal employees collect defaulted student loans. Deanne Loonin, of the National Consumer Law Center, called this a good first step, though only a first step. In a blog post about the proposals, she called the use of private debt collection agencies “a disaster” for financially distressed borrowers, and called for the Department of Education to stop using private debt collectors all together: “Debt collectors are not adequately trained to understand and administer the complex borrower rights available under the Higher Education Act, and the government does not provide sufficient oversight of their activities.”

3. Make it easier for borrowers who become disabled to get their student loans discharged. Currently, some borrowers who qualify as disabled through the Social Security system don’t know that they are eligible for a disability discharge, Loonin says. Making the disability discharge rules clear and consistent “is a critical change for some of the most vulnerable borrowers and should be implemented immediately,” she wrote.

4. Ensure that the private debt collectors hired by the Department of Education apply prepayments first to loans with the highest interest rates, unless the borrower requests a different allocation.

5. Make it easier for students to get IRS information to qualify for income-based student loan repayment.

6. Clarify the rules under which students who declare bankruptcy can get their student loans reduced or eliminated. Congress and the federal bankruptcy courts have imposed tough rules that make it far more difficult for student loan borrowers to get out from under their obligations than almost any other kind of debt. But the president asked the Department of Education to at least clarify the rules to collectors so they can be applied consistently.

What Government Can Do Next

While these steps would improve the lives of many people struggling with student debt, experts pointed to three bigger, but politically unlikely, changes that could make student loans far more affordable and fairer. First, simplify the government’s complicated, income-based repayment system into one option, and automatically sign all borrowers up for the program. University of Michigan economist Susan Dynarski, one of the nation’s leading researchers on financial aid, calls the current menu of “income-driven,” “income-contingent” and “income-based” options a “bewildering array” that requires students to jump through many bureaucratic hoops to qualify for the payment plans that will benefit them the most.

Second, stop charging fees on federal student and parent loans. O’Connell, of the association of financial aid administrators, says that the 4.292% fees on federal parent PLUS loans, for example, are not well explained to borrowers and add an unnecessary expense to families. Eliminating them, which would take congressional action, would save families more than $1 billion a year, he says.

And finally, make it easier for borrowers in dire financial straits to reduce or eliminate their loans in bankruptcy. Loonin, at the NCLC, notes that bankruptcy judges across the country apply varying levels of strictness to the rules, which say loans can only be discharged if repaying would cause an “undue hardship.” These variations make it unfair for borrowers seeking relief and force many to spend what little money they do have on lawyers. Since the strict bankruptcy rules were created by Congress, however, it’s up to Congress to change them.

Read next: The 100 Best Private Colleges for Student Borrowers

MONEY College

5 Ways to Get Free College Education Even If (When?) Obama’s Plan Dies

Congress probably won't approve the free community college plan, but there are lots of ways you can get free or affordable college courses.

Almost as soon as President Obama floated his proposal for free community college on Thursday night, experts began explaining the political, economic, and practical reasons it was unlikely ever to become a reality.

Chances are slim, it was pointed out, that he can persuade a Republican-controlled Congress to approve and fund the expensive plan

And community college leaders worried about their ability to handle a big influx of students attracted by free courses, some noting that insufficient revenues and high demand have forced some community colleges to turn away students in recent years.

But don’t despair: Many other programs are already making college free for thousands of students. And there are other proposals to eliminate up-front tuition that could open the college gates to more students in the future.

Here are five ways you can find free or very affordable college courses right now:

1) Some states and cities already have free or low-cost community college tuition. The Tennessee Promise, which is the model for President Obama’s plan, waives tuition not covered by other aid programs for students who file a Free Application for Federal Student Aid (FAFSA), donate eight hours of community service each semester, and earn a C grade point average. Similar programs are being debated in Oregon, Texas, Mississippi, and Chicago. Community colleges in California, the most affordable in the country, charge less than $1,500 a year in tuition and fees.

2) Financial aid and tax benefits already cover most community college tuition. The average community college charges about $3,350 a year in tuition and fees. By taking advantage of the $2,500 federal tuition tax credits, as well as financial aid such as the federal Pell Grant, the average community college student gets enough aid to cover tuition and the approximately $1,000 book bill, according to research by the College Board.

3) Alternative free college proposals. Several states are considering “Pay It Forward” proposals that would allow students to attend college without paying any tuition right away and instead repaying a percentage of their income over time. And other “free college” plans have also gained traction.

4) Established free college programs: The military, work colleges, and many generous colleges offer ways to get free college educations.

5) Free online courses: There are hundreds of free Massive Open Online Courses (MOOCs). Many, for a nominal fee, will award you college credits.

MONEY Ask the Expert

Why You Might Want to Take Student Loans Before Using Up College Savings

Ask the Expert - Family Finance illustration
Robert A. Di Ieso, Jr.

Q: “My daughter will be starting college this fall. I’m estimating the tuition will be about $25,000 each year. I’ve got about $45,000 put aside in a 529 for her. When should I tap that money?” —Henry Winkler, Colorado

A: The first thing you and your daughter should do is fill out a FAFSA, the federal financial aid application. Even if you think your household income will be too great to qualify for aid, it’s worth applying just to be certain, says Mark Kantrowitz, publisher of Edvisors.com, a website that helps people plan and pay for college. “I have seen many cases where families assume they won’t receive any aid, but actually do qualify based on the number of children they have currently attending college or because the high costs of the tuition resulted in a lower than expected family contribution amount.”

Don’t worry that the savings you currently have in your 529 will hurt her chances for aid either. Federal aid will be reduced by no more than 5.64% of the value of the account and account distributions are not considered income, Kantrowitz says.

Next, she should apply for the most available in federal direct student loans. In her first year, she can borrow $5,500. In her second year, $6,500, and any of the years following up to $7,500. Because you only get to borrow a certain amount in these direct federal student loans—which have much lower interest rates than Parent PLUS loans or private loans—it’s worth borrowing the max each year and accruing that interest rather than waiting and trying to borrow the full cost of college her third or fourth year, says Kantrowitz.

If you have other savings accounts you can draw from, Kantrowitz recommends setting aside $4,000 a year from such an account for your daughter’s college education so that you can take advantage of the American Opportunity Tax Credit.

With this credit, you get 100% of the first $2,000 you spend on tuition, fees and course materials paid during the year, plus 25% of the next $2,000. The credit is worth $2,500 off your tax bill. Also, 40% of the credit (up to $1,000) is refundable, which means you can get it even if you owe no tax.

The caveat: You will need to have a modified adjusted gross income of $80,000 or less, or $160,000 or less for married couples, a year to get the full benefit. If you earn more than $90,000 or $180,000 for joint filers, you cannot claim the credit.

You cannot use any of the funds from your 529 to qualify for the tax credit since that plan is already a form of tax-free educational assistance. If you do not have an additional $4,000 a year to put toward her education, you can also qualify for the credit by using the student loan amount she received—but just know that you may not be also able to claim the student loan deduction on that amount since you’ve already received a tax break on it, says Kantrowitz. (Right now you can claim both, but Kantrowitz says that could change in the future.)

After deducting any grant aid, her student loan sum, and the $4,000 from another savings account, pay the remaining education expenses with funds from the 529 plan.

“Under this plan it is likely your 529 will be exhausted after her third year of college, or sooner if you don’t put aside that additional $4,000 for the tax credit each year,” says Kantrowitz.

To make up the difference you’ll need to secure another loan. If you own a home, consider home equity financing before PLUS loans, since the latter currently carry a 7.21% interest rate and come with an “origination” fee of about 4.3% of the principal amount you borrow.

If you must take the PLUS, you might be tempted to try to lock in current interest rates by borrowing to cover the first two years’ worth of expenses. But you’d end up having to borrow more since she’ll be getting less federal loan money those first two years, and you’d have to pay two more year’s worth of interest. Even with possible rate increases, you’re still better off taking the PLUS loans in her last two years.

RELATED:

MONEY financial aid

7 Legal Ways to Squeeze More College Aid From the FAFSA

vice squeezing dollar bill
Steven Puetzer—Getty Images

Smart timing, cash management and college application strategies can mean thousands of dollars in extra financial aid.

Correction appended: January 8

Filling out the 10 eye-crossing pages of the 2015-16 Free Application for Federal Student Aid, the most important application for need-based college financial aid, may not seem like a fun adventure in Super Mario’s Mushroom Kingdom. But hidden among its 103 questions are hints that, if followed correctly, can dramatically increase your need-based aid and possibly rescue your dreams of an affordable college education.

Before you spend a lot of time on this, though, use a few college Net Price Calculators, the federal government’s FAFSA Forecaster, or the College Board’s Expected Family Contribution (EFC) calculator to see whether you’re likely to receive any need-based aid. If you’re planning to attend an in-state public college, and your family has an Expected Family Contribution (or EFC) above about $25,000 (which general means the family income is above $125,000) the odds of getting need-based grants are very low, says Paula Bishop, an independent financial aid counselor in Bellevue, Wash. For students planning on private colleges, the need-based aid EFC cutoff is generally about $65,000, she says (which typically means the family has an income greater than $200,000).

If you’re above those cutoffs, it still pays to fill out the FAFSA to qualify yourself for low-cost student loans, and merit programs that require the form, but your focus should be on maximizing merit aid – which is money awarded based on the student’s grades or other accomplishments without regard to family income.

If you’re below those cutoffs, use this “not-cheating” (since all these strategies are legal) FAFSA cheat sheet:

1. Go online. You can print out a PDF and fill out the FAFSA on paper. But the online version uses skip logic, which makes it easier and faster. Also, for later filers, the online version will import your tax information, which speeds things up even more.

2. Time it right. Fill out the 2015-16 form right now if you live in one of the nine states with “first-come, first-served” financial aid programs: Alaska, Illinois, Kentucky, North Carolina, Oregon, South Carolina, Tennessee, Vermont, and Washington. These states often run out of money quickly, so act fast, even if you don’t have your 2014 tax information. You can fill out the 2015-16 form using estimates based on your 2013 tax forms. Then, when you do your taxes, you can go back into your FAFSA and make any updates or corrections.

Everybody else has more time—but not a lot. Those who file the FAFSA by March 30 receive, on average, twice the grant money as later filers, calculates Mark Kantrowitz, publisher of the financial aid website Edvisors.com. Many colleges and states have early deadlines for state aid: The deadline for filing for state financial aid in Connecticut is Feb. 15; Idaho, Maryland, Michigan, Oklahoma, Rhode Island and West Virginia cut off their state aid after March 1. California’s deadline is March 2. You can check your state’s aid deadline here, but you’ll have to call, or check the websites of, the colleges you’re applying to for their aid deadlines.

Don’t despair if you still haven’t filled out last year’s FAFSA. You can still qualify for federal aid for the 2014-15 academic year by filling out last year’s FAFSA, even as late as June 30 of this year

3. Clarify your relationships. Questions 16 and 59 ask about the students’ and parents’ marital status as of the day you file the form, to see if both parents’ income should be counted as financial resources for the student. Rules adopted in 2014 eliminated a loophole that allowed parents who were cohabiting but didn’t happen to be married to report only one parent’s income (which usually increased the student’s eligibility for need-based aid). Divorced or separated parents may report one parent’s income (the parent with whom the student spends the most time) only if the other parent does not live in the same house. In other words, if you’re in the process of getting divorced or separated anyway, one spouse should move out before you finish the FAFSA.

4. Parents: Don’t brag. Some states and colleges offer extra aid to children of parents who haven’t earned college degrees. Questions 24 and 25 ask about the highest level of education your parents completed. So if one or both of your parents, attended community college, or even are just one credit away from a bachelor’s degree, make sure to fill in the dot only for “high school,” Bishop advises.

5. Pay your bills first. Questions 41 and 90 ask about how much cash students and parents have in savings and checking accounts at the moment you are filling out the FAFSA. But notice that there are no questions on the FAFSA about your debts or bills. So if you’ve got a sufficient emergency cash reserve, use any extra cash to pay down credit card, car loan, or other bills before you finish filling out the form, and report the newly lower cash amount on the FAFSA.

6. Shield your investments. Questions 42, 43, 91 and 92 ask about the student’s and the parents’ investments. But many filers don’t realize that the value of any retirement accounts, as well as the home you live in, should not be included in these boxes. So if you’ve got a lot of money in non-retirement accounts, prepay your mortgage or plow some into Roth IRAs. One big advantage of Roth IRAs: You can take out your contributions (but not any earnings) tax-free to pay college bills.

7. Strategize your college list. A growing number of colleges are analyzing the order in which students list colleges on FAFSA question #103 to determine how likely the student is to attend. Colleges assume that students list colleges in their order of preference, and some will award more aid to those who list their college second or third, say, in an effort to woo students away from their first choice. So make sure the top three colleges in your list are schools you really want to attend, and, if possible, are schools that compete with one another, in the hopes of encouraging them to raise your aid offer.

Correction: The original version of this story misstated the scenario in tip No. 6. The time to take these steps is when you have a lot of money in non-retirement accounts.

Read next: Best Colleges You Can Still Apply To For Fall 2015

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Here’s How the Government Thinks We Should Grade Colleges

Access, affordability, and outcomes are the three most important factors. But how will the government measure them?

The federal government Friday morning released what it’s calling a “framework” to rate America’s colleges on their performance in three areas: how many low-income and disadvantaged students they educate; how affordable they are; and how well their graduates do financially, in the job market, and in graduate school.

The U.S. Department of Education said it planned to issue the ratings “in time for the 2015 school year” — so, presumably, by August of 2015.

But researchers familiar with the government’s plans say that ambitious and idealistic plan will be stymied by an ugly reality: much of the information needed to rate the colleges on these factors doesn’t exist yet.

While describing the government’s plan as “thoughtful,” Terry Hartle, a spokesman for the nation’s largest association of colleges, the American Council on Education, said “It is not clear how they will get it done.” The problem, he and other researchers said, is that there is currently no easy way to mine the government’s data on citizens to find out, for example, which graduates of which colleges go on to graduate schools, how much graduates of each college earn, or how much alumni of each college are paying on their student loans.

In August of 2013, President Obama pledged to create ratings based on which colleges are “offering the best value so students” and giving taxpayers “a bigger bang for their buck.” He said he hoped the government would provide more financial aid to students at colleges that do the best job providing opportunities, educating students, and helping launch good careers.

In its announcement Friday, the Education Department asked for public comments on its plans to judge colleges by the following factors:

Access: The Education Department said it was thinking of judging colleges’ provision of opportunities to all by examining, for example, factors such as the percentage of students receiving Pell Grants, which are grants awarded only to low-income students, and the percentage of students whose parents did not attend college. It was also considering looking at the family incomes of students at each college, and giving higher ratings to colleges with more students from the lowest income groups.

Affordability: The government is considering giving poor ratings to schools that provide so little financial aid that families end up having to pay much more than the “Expected Family Contribution” (EFC) after they fill out their Free Application for Federal Student Aid (FAFSA). Financial aid is generally in such short supply that 99% of colleges fail to provide enough grants or scholarships so that every student has to pay only their EFC. But currently, colleges are not required to reveal how many students they leave with financial aid “gaps” or how large those gaps are. Additionally, the ratings may ding colleges with high “net prices,” which is the price students (and their parents) pay after all grants are subtracted. The government said it may look at either the overall average net prices, or the average net prices paid by families divided into five income groups, such as those earning up to $30,000, or those earning more than $100,000.

Outcomes: While graduation rates are a commonly used metric for judging colleges, the Education Department proposes adding other gauges such as how many new graduates find jobs quickly, and how much money they earn over the long term. In theory, the Internal Revenue Services or the Social Security Administration might be able to provide the employment and earnings information for graduates of each school, but privacy concerns have stymied efforts to gather that data in the past. The Department says it may also consider what percentage of graduates are paying their loans off, and what percent go on to graduate school. For community colleges, the Department said it may consider what percentage of students transfer to four-year colleges.

To help families gauge the affordability and value of colleges, MONEY hired Mark Schneider, a former head of the federal National Center for Education Statistics, to develop college rankings based on quality, affordability, and outcomes, using the best data currently available, including, for example, a national survey of college graduates’ earnings by Payscale.com. Our rankings of the 665 top colleges in the country were released in the summer of 2014.

Read next: The Long, Sad Tradition of College Admissions Mistakes

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