On this week’s episode we cover a very important topic, the financial obligations of making your college decisions. These decisions are very important because for every dollar you take you out from the bank to either completely pay for or supplement a scholarship you were awarded you must pay back the dollar plus some interest.
If not monitored properly you could end up taking out too much and owing even more back. This is a mistake many athletes and families make every year because they don’t place a price on playing sports in college. Remember only certain sports pay for all of your college expenses completely, most will only have the ability to give partial athletic scholarships.
First let’s discuss the make-up of a school loan. Almost always, when dealing with partial scholarships (equivalency sports) sports, a coach will ask you and your family what you can afford to pay to attend that particular school. It is normal for the coach to try and make up the difference with the scholarship once they understand what type of financial situation you and your family will be able to afford. This aspect is very important because honesty is the best policy. A coach only has so much scholarship money to give each year and if you are an athlete that coach wants but cannot afford to bring you on then they could pass on you.
Once the affordability and scholarship amounts are decided you and your family have to decide if the non-scholarship part of your education will be paid for by a college fund or by loans. If you plan on taking out loans you will have to fill out the Free Application for Federal Financial Aid. If you are lucky enough and early enough to receive grants then you can save some money but most will be offered federal loans. These loans will be subsidized (government will pay the interest) or un-subsidized (you pay the interest). The interest will begin to draw on these loans the day you take deposit them into your account. Each loan you take out is packaged individually, most of the time by semesters, and the interest adds on each of them according to when they were borrowed. At the end of your education you will receive a markup of all your loans as well as the capitalized interest that will be added to you loans. This capitalized interest is all of the interest that has added up from each loan over the life of the loan.
Understanding the affordability of college can save you a lot of money later in life. When a scholarship opportunity is offered you really do have to look at all your options of attendance, is it cheaper at another school, will the education be the same, am I willing to afford this school no matter what, is playing college sports that important to me, etc. The reason you need to ask these questions are because if you are offered a 50% scholarship at a school that has tuition of $50,000 a year, you are responsible for $25,000 of that tuition. Over a four year education you will owe or have paid $100,000 all to play sports in college. If you took out loans you owe interest as well. Looking around at other schools could offer better opportunities at a cheaper rate but this takes time and work, you must be willing to not take the first offer that comes in or be able to negotiate a better deal.