Grandparents are pitching in. Students are working more, and eating less. Parents are taking out more and bigger federal loans.

As the economy has declined and college costs have risen, families have buckled down and become more resourceful to pay for college.

They have been so successful at funding tuition that college enrollment is up dramatically. A record 40 percent (or 11.5 million) of 18- to 24-year-olds are taking at least one college course this year. Add in all the adults returning to school because of the lousy job market, and the total number of college students is likely to exceed 19 million this year.

How are more students affording tuition even though many colleges' prices are at record highs and many scholarship programs, private lenders, and family savings accounts have been wiped out?

1. Relatives

College officials around the country say they are noticing more checks coming in from grandparents, uncles, and other relatives to cover student bills. A survey by the MetLife Mature Market Institute earlier this year found that two thirds of grandparents had provided financial help to their descendents in the last five years. The average size of the help: $3,000. A quarter of the donors said they had increased their gifts because of recent economic troubles.

Other relatives are pitching in more, too. Maribeth Ford, a single mom, says she was surprised and thrilled when her brother hinted he would be willing to loan her son enough to cover the $10,000 gap between his scholarships, her loans, and Iona College's $41,000 price tag. "I wasn't expecting the level of help that he is offering. My son and I are very fortunate," she says. "My attitude was: Apply for everything possible, ask for help where reasonable (the worst people can say is no), and my son had to contribute. Not a glamorous story, but one that's working for us right now."

2. Bigger and better tax breaks

The federal government estimates perhaps 2 million tuition-paying Americans will be able to get as much as $2,500 back on their taxes early next year by taking advantage of the new American Opportunity tax credit.

3. Scholarships

Although many state and private scholarship programs have been cut, the federal government has increased the maximum size of Pell Grants (which go to students from low-income families) from $4,731 last year to $5,350. In addition, many private colleges are giving significantly more and bigger scholarships to their students. Katie Stanko, a senior at Sharpsville Senior High School in Pennsylvania, says that she's already lined up a promise of a $20,000-a-year scholarship from one private college. Add in Pell and state grants and, if she's lucky, a few more private scholarships, and her "fairy tale isn't too far from reality," Stanko says. Her technique: "Start looking for scholarships in your junior year, leave no page unturned, and apply to every scholarship you qualify for. You never know unless you apply. So, that's what I'm doing."

4. Cheaper schools

The biggest increase in enrollment has been in two-year community colleges, which are the lowest-priced colleges in the country. The sticker price of a year's tuition at an average community college rose by $220 this year, to $2,540, the College Board reported. But because of increased Pell Grants and tax breaks, the out-of-pocket (or net) price paid by community college students actually fell this year, the College Board believes. The average community college student got enough aid to pay all tuition, with $460 left over to help pay for books and supplies (which typically add another $1,000 to total college costs), the board estimates.

5. Cutting other costs

Some colleges have noted that students are cutting back on all kinds of expenditures. At Goucher College near Baltimore, for example, school managers say students are choosing smaller meal plans. By switching from a 480-meal-per-year plan to a 380-meal plan, students can save about $400 at Goucher.

6. More student work

Colleges say more students are taking part-time jobs. At Pitzer College in Claremont, Calif., for example, 93 percent of financial aid recipients took work-study jobs this fall. In 2007, only 89 percent of aid recipients took such jobs. Since students who work more than 20 hours a week generally hurt their grades, schools typically cap campus jobs below that. Still, good work-study jobs allow students to earn at least $100 a week, or at least $2,500 for the academic year.

7. More, bigger, cheaper, and easier federal student loans

At least 6 million students are taking out federal Stafford student loans this year, up from about 4 million two years ago. Young freshmen can borrow up to $5,500. Upperclassmen 24 and older can borrow up to $12,500. The government has made it easier to repay those loans by allowing graduates to cap their monthly payments below 15 percent of their incomes.

8. More, bigger, and (temporarily) easier federal parent loans

Although parents are having a much harder time getting home equity or private loans, the government has eased a little of the immediate pain of taking out federal PLUS loans, which can cover a student's cost of attendance (less any scholarships or other aid). Parents can now put off repaying their federal education loans until their student leaves school. That could come back to bite them in a few years, however, because the principal keeps building at about 8 percent a year. Parents who borrow the typical $8,800-a-year PLUS loan could easily owe more than $44,000 by the time their kid graduates. It would take payments of more than $500 a month to pay that off in 10 years. While some parents might get enough raises in that time to pay such big bills, Stuart Siegel, a private financial aid counselor in Erie, Pa., worries that lots won't. Many parents don't realize that even declaring bankruptcy doesn't wipe out education loans, so some parent borrowers may be setting themselves up for financial crises in a few years.

9. Family savings

Although the investment markets' meltdown has eroded most families' savings, many parents find that they can free up hundreds of extra dollars once their student moves to campus. The federal government estimates teenagers cost parents more than $6,000 a year in food, clothing, transportation, and other extras. So parents who stop allowances and take away the keys to the family car (and suspend expensive teen car insurance) can reduce their costs by perhaps $4,000 during the nine months the student is at school.

10. Corporate largesse

More than 10 million American families are building up college savings by using credit cards or shopping through websites of rebate companies such as Upromise or BabyMint. Another option: More than 200 private colleges offer scholarships to parents of young kids when the parents shop or invest with members of the Tuition Rewards network.


10 Secrets to Raising More Than $15,000 for College

© U.S. News & World Report


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