In Chapter Four of my book, The Busy Adult’s Guide to Making College Happen! (Axiom Award 2009), I discuss the many forms of financial aid available to college students. The premise behind the chapter is that the Federal Government wants you to go to college, so they make massive amounts of money available to you. Intuitively one probably asks themselves, “why would our government care whether we go to college? Yes, it’s true that our Government is put in place for the people and to serve the people, so from that perspective it makes sense that if the people want an education they should receive one.”
Our government and most governments of the “westernized world” provide a very solid primary school education. One can debate this given our students’ global scores in reading, writing and arithmetic vis-à-vis those of other countries, but if you follow the trail of the results, they’re decent; not great, but decent.
But I digress, back to financing college. Why does our government want you to go to college and what programs are available to help you finance your higher education aspirations? Let’s start with the easy answer first. Our government wants you to go to college because a higher education for you means higher productivity and higher taxes paid by you due to a higher income level.
Think about all of the innovation that has occurred in our world over the last 100 years. We have had more medical, technical and industrial breakthroughs during the last 100-years than “all the rest of time” put together.
It’s hard to believe what our world would be like today if we had not been able to cure some of the worst diseases in history, had never invented the personal computer, never developed modern machines that can take the labor place of thousands of men/women – freeing those same people up to work on higher level activities. Imagine the world without the army of scientists, medical doctors and engineers who were responsible for all of this innovation and the innovation to come. What used to kill you 100 years ago is cured with one pill today.
With higher productivity comes higher consumption and a higher quality of life
Look back 100 years. The average person lived on a farm, plowed their soil with an ox (soil that was questionable at best because the agricultural advancements of today had not been discovered yet), and the crop yields were very low. Farmers were able to feed their families and some folks in the neighboring towns, but little more.
Fast forward to today . . .
Today’s farmers have a bachelors degree in agriculture, state of the art farming equipment, and seed and soil that produces consistent bountiful harvests – every time. This added productivity ensures that Americans are the best fed people on the planet (look at the obesity rates and you’ll see what I mean – the subject of another article). More productivity means higher consumption and more tax revenue.
Go back two hundred years, if someone reached the ripe old age of forty they were very lucky. Today that number is in the seventies and moving North. Imagine then adding twenty five years of tax revenue onto the majority of US Citizens – great for the country, great for the person.
Americans who have a bachelors degree earn on average 77% more than those without. This means that the college graduate contributes more taxes (likely much more than 77% given our escalating tax system).
With that as a backdrop, there is over $170 billion of financial aid available to students annually, and 67% of that aid comes from the Federal Government. Here is a snapshot of what’s available and for whom.
Pell Grant – this is the staple of the entire free college money system. The Pell Grant provides $5,550 a year of non-repayable (i.e. FREE) college funding to those in a certain lower income range.
Scholarships – A little less free than a Pell Grant, scholarships are awarded based on a variety of factors including but not limited to academic aptitude (academic scholarships), athletic ability (athletic scholarships), ethnicity or religious affiliations or one of a number of more esoteric measures.
Federal Loans – Stafford or Perkins loans will likely comprise a large portion of your overall “package.” They are either deemed subsidized or unsubsidized. Subsidized loans means the there is no interest accrual while you are in college, unsubsidized mean there is, and it’s added to you balance to be repaid after graduation.
The maximum Stafford loan is $9,500 year one, $10,500 year two and $12,500 year three and beyond. There is a total cap of $57,500 upon graduation with a four year degree.
Perkins loans provide an additional $4,000 annually. They are lower interest loans and awarded by the school based on exceptional financial need.
The Military Option
This is the mother-load of financial aid. Up to $51,300 of free money from the US Government for two years of active service and an honorable discharge. Under the GI Bill this amount is index for inflation so expect it to go up in the future. See our article Montgomery GI Bill and More! – Military Education Assistance Programs, for more information on this financing option.