Higher education is the second most expensive purchase in life, after a house, for the vast majority of people who seek it.
And Minnesotans go to college in greater proportions than residents of 40 other states. Just over 37% of adults in the state over the age of 25 have at least a bachelor’s degree, according to federal data.
As a result, paying for college is an issue that shapes the finances of many Minnesota households in the years before students leave — and the personal finances of individuals for years after they graduate.
Getting financial help can be easier than many people think. As we’ll show, one app, updated every year, does most of the work.
But as neighboring columns discuss – and we’ll examine them in future stories – the options and decisions that come next are dizzying.
Two fairly recent developments have made paying for an education even more turbulent in people’s lives and finances.
First, tuition and other costs have risen faster than inflation over the past three decades. For people who end up borrowing to pay for part of their college education, that means larger loan balances that take longer and cost more to pay off.
Second, the age of students has increased over this period. Today, colleges and universities are no longer dominated by students who have just graduated from high school.
“The majority of students in the United States are actually non-traditional age students,” said Meghan Flores, manager of state grants and financial aid at the Minnesota Office of Higher Education.
“They’re not out of high school yet, so that ‘traditional’ word is a bit of a misnomer,” she said. “A lot of people start college and life goes by and they quit and go back to it later. Or a lot of people just start working and later decide ‘Hey, I want to study.’ We also see a lot of people retraining or coming back for a second degree.”
The financial aid process is the same regardless of when a person enters a college or university and regardless of the type of degree pursued.
The most recent debate over education funding has now centered on two issues debated in the Biden administration — whether to further extend the pandemic-related moratorium on federal loan repayments and whether to forgive the Americans $10,000 of their student loan debt.
The fundamental process of obtaining financial aid for higher education, however, does not depend on these debates. Here are the basics of how it works in Minnesota and where to get help:
What to do first
The most savvy parents start saving and investing for college-related costs when their children are very young. Many are turning to so-called 529 plans, named for part of the US tax code, which allow adults to prepay tuition or make deposits in college savings accounts and benefit from a tax advantage in the process.
States, investment management companies and other financial institutions offer 529 plans. An account in the Minnesota state plan, called MNSAVES and administered by TIAA-CREF, can be opened with an initial deposit of just $25.
But when it comes time to apply to college, parents and prospective students must take two other important steps.
The first is to create a Federal Student Aid ID. This can be done online at studentaid.gov. IDs are not shared. If the student is fresh out of high school, still financially dependent on their parents, identification must be established for the student and the parent or parents individually.
The ID has been used many times over the years with the federal government, state, college or university, banks, other lenders, and grantors in the financial aid process.
The second step is to gather the financial information needed to complete FAFSA, the free application for federal student aid.
The app contains dozens of questions about finances for a family or a student, as the case may be. But one key thing that may trip people up is that it looks at family or student income two years earlier.
This means that students entering college this fall had to provide 2020 income information. Students starting in fall 2023 will need 2021 income information.
FAFSA is the fundamental interface in the field of financial aid. Students and their families complete it — usually online these days, but paper applications are still available — before the freshman year of college. Then they start over with each new school year. And if they go on to higher education, they start over every year.
For users of the online application, it can be linked to IRS tax returns, simplifying some of the data entry.
After the application is submitted, the Federal Student Aid Office of the Department of Education reviews the family’s (or student’s) financial situation. Usually within a week of the request, the office responds with an offer of federal assistance. It then sends this offer to the colleges the student wishes to attend.
While the federal financial aid process is only open to US citizens, Minnesota is one of the states that has a financial aid process for people who are not citizens. Called the Minnesota Dream Act, it makes assistance available to undocumented and “DACAmented” students who have attended a high school in Minnesota for three years or who have graduated or earned a GED in the state.
When to send FAFSA
In 2016, the government upended the long-standing routines of admissions and financial aid officers at colleges across the country by shifting the start of the FAFSA process three months earlier. For students applying to start college in the fall of 2017, they could submit the FAFSA on October 1, 2016, instead of January 1, 2017. It has been that way ever since.
“It’s a great thing if families are ready to enter the process at this time,” said Kristin Roach, director of financial aid at the University of St. Thomas in St. Paul. “But it’s also related to admissions.”
In response, many colleges and universities moved their early admissions process to early fall. This is because they do not review applications for financial aid before deciding whether or not to admit a student.
At St. Thomas, prospective students are assigned a financial aid counselor as soon as they are accepted. And if they decide to enroll, that advisor will stay with the student until they graduate. “Our hope is that they provide a financial safety net as the student persists in St. Thomas,” Roach said.
However, deadlines for early and regular admissions vary by school. Flores said prospective students and their families should submit the FAFSA as soon as they can after applying to the schools they are considering.
The window for applying for financial assistance is extremely long – 21 months. Students who have just completed the 2021-22 regular school year have until the end of this month to apply for financial aid, although many students who need help are unlikely to wait that long for ask for it.
“The earlier you start, the more time you give yourself to make a well-rounded decision,” Flores said.